Correlation Between Dimensional International and IShares Russell

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

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

Diversification Opportunities for Dimensional International and IShares Russell

0.27

Correlation Coefficient

Dimensional International  IShares Russell

Modest diversification

The 3 months correlation between Dimensional and IShares is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International High and iShares Russell Top in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell Top and Dimensional International 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 International High are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell Top has no effect on the direction of Dimensional International i.e., Dimensional International and IShares Russell go up and down completely randomly.

Pair Corralation between Dimensional International and IShares Russell

Given the investment horizon of 90 days Dimensional International High is expected to under-perform the IShares Russell. But the etf apears to be less risky and, when comparing its historical volatility, Dimensional International High is 1.14 times less risky than IShares Russell. The etf trades about -0.26 of its potential returns per unit of risk. The iShares Russell Top is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  8,134  in iShares Russell Top on October 13, 2024 and sell it today you would lose (280.00) from holding iShares Russell Top or give up 3.44% of portfolio value over 90 days.

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

Dimensional International High  vs.  iShares Russell Top

Dimensional International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional International High has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

iShares Russell Top

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Russell Top has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IShares Russell 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 International and IShares Russell

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

The idea behind Dimensional International High and iShares Russell Top 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..