Correlation Between Dimensional Core and IShares AsiaPacific

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

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

Diversification Opportunities for Dimensional Core and IShares AsiaPacific

0.09

Correlation Coefficient

Dimensional Core  IShares AsiaPacific

Significant diversification

The 3 months correlation between Dimensional and IShares is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and iShares AsiaPacific Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares AsiaPacific and Dimensional 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 Dimensional Core Equity are associated (or correlated) with IShares AsiaPacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares AsiaPacific has no effect on the direction of Dimensional Core i.e., Dimensional Core and IShares AsiaPacific go up and down completely randomly.

Pair Corralation between Dimensional Core and IShares AsiaPacific

Given the investment horizon of 90 days Dimensional Core Equity is expected to under-perform the IShares AsiaPacific. In addition to that, Dimensional Core is 1.51 times more volatile than iShares AsiaPacific Dividend. It trades about -0.09 of its total potential returns per unit of risk. iShares AsiaPacific Dividend is currently generating about 0.02 per unit of volatility. If you would invest  3,562  in iShares AsiaPacific Dividend on December 30, 2024 and sell it today you would earn a total of  22.00  from holding iShares AsiaPacific Dividend or generate 0.62% return on investment over 90 days.

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

Dimensional Core Equity  vs.  iShares AsiaPacific Dividend

Dimensional Core Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dimensional Core Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dimensional Core is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

iShares AsiaPacific

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares AsiaPacific Dividend are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares AsiaPacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dimensional Core and IShares AsiaPacific

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

The idea behind Dimensional Core Equity and iShares AsiaPacific Dividend 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.