Correlation Between IShares and Dimensional ETF

Can any of the company-specific risk be diversified away by investing in both IShares and Dimensional ETF 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 and Dimensional ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IShares and Dimensional ETF Trust, you can compare the effects of market volatilities on IShares and Dimensional ETF 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 with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares and Dimensional ETF.

Diversification Opportunities for IShares and Dimensional ETF

-0.54

Correlation Coefficient

IShares  Dimensional ETF

Excellent diversification

The 3 months correlation between IShares and Dimensional is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding IShares and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust and IShares 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 are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of IShares i.e., IShares and Dimensional ETF go up and down completely randomly.

Pair Corralation between IShares and Dimensional ETF

If you would invest  4,106  in Dimensional ETF Trust on September 5, 2024 and sell it today you would earn a total of  31.00  from holding Dimensional ETF Trust or generate 0.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

IShares  vs.  Dimensional ETF Trust

IShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IShares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Dimensional ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Dimensional ETF is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares and Dimensional ETF

The main advantage of trading using opposite IShares and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares position performs unexpectedly, Dimensional ETF 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 ETF will offset losses from the drop in Dimensional ETF's long position.

The idea behind IShares and Dimensional ETF Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.