Correlation Between IShares Russell and Dimensional Targeted
Can any of the company-specific risk be diversified away by investing in both IShares Russell and Dimensional Targeted at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares Russell and Dimensional Targeted into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Russell 2000 and Dimensional Targeted Value, you can compare the effects of market volatilities on IShares Russell and Dimensional Targeted and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares Russell with a short position of Dimensional Targeted. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Dimensional Targeted.
Diversification Opportunities for IShares Russell and Dimensional Targeted
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Dimensional is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 2000 and Dimensional Targeted Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Targeted and IShares Russell is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares Russell 2000 are associated (or correlated) with Dimensional Targeted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Targeted has no effect on the direction of IShares Russell i.e., IShares Russell and Dimensional Targeted go up and down completely randomly.
Pair Corralation between IShares Russell and Dimensional Targeted
Considering the 90-day investment horizon IShares Russell is expected to generate 1.16 times less return on investment than Dimensional Targeted. But when comparing it to its historical volatility, iShares Russell 2000 is 1.01 times less risky than Dimensional Targeted. It trades about 0.23 of its potential returns per unit of risk. Dimensional Targeted Value is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 5,563 in Dimensional Targeted Value on August 28, 2024 and sell it today you would earn a total of 541.00 from holding Dimensional Targeted Value or generate 9.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Russell 2000 vs. Dimensional Targeted Value
Performance |
| Timeline |
| iShares Russell 2000 |
| Dimensional Targeted |
IShares Russell and Dimensional Targeted Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Russell and Dimensional Targeted
The main advantage of trading using opposite IShares Russell and Dimensional Targeted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell position performs unexpectedly, Dimensional Targeted can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dimensional Targeted will offset losses from the drop in Dimensional Targeted's long position.| IShares Russell vs. iShares Russell 2000 | IShares Russell vs. iShares Russell 1000 | IShares Russell vs. iShares Russell Mid Cap | IShares Russell vs. iShares Russell 1000 |
| Dimensional Targeted vs. Dimensional Small Cap | Dimensional Targeted vs. Dimensional Core Equity | Dimensional Targeted vs. Dimensional International Value | Dimensional Targeted vs. Dimensional Equity ETF |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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