Correlation Between Dimensional ETF and IShares Core

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

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

Diversification Opportunities for Dimensional ETF and IShares Core

-0.26

Correlation Coefficient

Dimensional ETF  IShares Core

Very good diversification

The 3 months correlation between Dimensional and IShares is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP and Dimensional ETF 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 ETF Trust are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and IShares Core go up and down completely randomly.

Pair Corralation between Dimensional ETF and IShares Core

Given the investment horizon of 90 days Dimensional ETF Trust is expected to generate 0.62 times more return on investment than IShares Core. However, Dimensional ETF Trust is 1.62 times less risky than IShares Core. It trades about -0.21 of its potential returns per unit of risk. iShares Core SP is currently generating about -0.25 per unit of risk. If you would invest  2,740  in Dimensional ETF Trust on October 7, 2024 and sell it today you would lose (73.00) from holding Dimensional ETF Trust or give up 2.66% of portfolio value over 90 days.

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

Dimensional ETF Trust  vs.  iShares Core SP

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. In spite of fairly stable basic indicators, Dimensional ETF is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Core SP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking indicators, IShares Core is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Dimensional ETF and IShares Core

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

The idea behind Dimensional ETF Trust and iShares Core SP 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.