Correlation Between IShares Core and Dimensional ETF

Can any of the company-specific risk be diversified away by investing in both IShares Core 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 Core 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 Core SP and Dimensional ETF Trust, you can compare the effects of market volatilities on IShares Core 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 Core with a short position of Dimensional ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Dimensional ETF.

Diversification Opportunities for IShares Core and Dimensional ETF

0.99

Correlation Coefficient

IShares Core  Dimensional ETF

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 Core SP 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 Core 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 Core SP 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 Core i.e., IShares Core and Dimensional ETF go up and down completely randomly.

Pair Corralation between IShares Core and Dimensional ETF

Considering the 90-day investment horizon IShares Core is expected to generate 1.2 times less return on investment than Dimensional ETF. But when comparing it to its historical volatility, iShares Core SP is 1.41 times less risky than Dimensional ETF. It trades about 0.18 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,906  in Dimensional ETF Trust on September 12, 2024 and sell it today you would earn a total of  373.00  from holding Dimensional ETF Trust or generate 12.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares Core SP  vs.  Dimensional ETF Trust

iShares Core SP

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile forward-looking indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dimensional ETF Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional ETF Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Dimensional ETF showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Core and Dimensional ETF

The main advantage of trading using opposite IShares Core and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core SP 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.