Correlation Between IShares Core and Dimensional Global

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

By analyzing existing cross correlation between iShares Core 5 10 and Dimensional Global Core, you can compare the effects of market volatilities on IShares Core and Dimensional Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Dimensional Global.

Diversification Opportunities for IShares Core and Dimensional Global

0.87

Correlation Coefficient

IShares Core  Dimensional Global

Very poor diversification

The 3 months correlation between IShares and Dimensional is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core 5 10 and Dimensional Global Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Global Core 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 5 10 are associated (or correlated) with Dimensional Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Global Core has no effect on the direction of IShares Core i.e., IShares Core and Dimensional Global go up and down completely randomly.

Pair Corralation between IShares Core and Dimensional Global

Given the investment horizon of 90 days iShares Core 5 10 is expected to under-perform the Dimensional Global. In addition to that, IShares Core is 1.26 times more volatile than Dimensional Global Core. It trades about -0.09 of its total potential returns per unit of risk. Dimensional Global Core is currently generating about 0.02 per unit of volatility. If you would invest  5,422  in Dimensional Global Core on September 12, 2024 and sell it today you would earn a total of  13.00  from holding Dimensional Global Core or generate 0.24% return on investment over 90 days.

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

iShares Core 5 10  vs.  Dimensional Global Core

iShares Core 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core 5 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dimensional Global Core

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Global Core are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Dimensional Global is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Core and Dimensional Global

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

The idea behind iShares Core 5 10 and Dimensional Global Core 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.