Correlation Between IShares Broad and Dimensional Marketwide
Can any of the company-specific risk be diversified away by investing in both IShares Broad and Dimensional Marketwide 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 Broad and Dimensional Marketwide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Broad USD and Dimensional Marketwide Value, you can compare the effects of market volatilities on IShares Broad and Dimensional Marketwide 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 Broad with a short position of Dimensional Marketwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Broad and Dimensional Marketwide.
Diversification Opportunities for IShares Broad and Dimensional Marketwide
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Dimensional is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares Broad USD and Dimensional Marketwide Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Marketwide and IShares Broad 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 Broad USD are associated (or correlated) with Dimensional Marketwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Marketwide has no effect on the direction of IShares Broad i.e., IShares Broad and Dimensional Marketwide go up and down completely randomly.
Pair Corralation between IShares Broad and Dimensional Marketwide
Given the investment horizon of 90 days iShares Broad USD is expected to generate 0.49 times more return on investment than Dimensional Marketwide. However, iShares Broad USD is 2.02 times less risky than Dimensional Marketwide. It trades about 0.28 of its potential returns per unit of risk. Dimensional Marketwide Value is currently generating about -0.08 per unit of risk. If you would invest 5,047 in iShares Broad USD on December 1, 2024 and sell it today you would earn a total of 96.00 from holding iShares Broad USD or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Broad USD vs. Dimensional Marketwide Value
Performance |
| Timeline |
| iShares Broad USD |
| Dimensional Marketwide |
IShares Broad and Dimensional Marketwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Broad and Dimensional Marketwide
The main advantage of trading using opposite IShares Broad and Dimensional Marketwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Broad position performs unexpectedly, Dimensional Marketwide 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 Marketwide will offset losses from the drop in Dimensional Marketwide's long position.| IShares Broad vs. iShares 5 10 Year | IShares Broad vs. iShares Broad USD | IShares Broad vs. iShares 1 5 Year | IShares Broad vs. iShares 0 5 Year |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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