Correlation Between Dimensional ETF and IShares SP

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

Diversification Opportunities for Dimensional ETF and IShares SP

-0.18

Correlation Coefficient

Dimensional ETF  IShares SP

Good diversification

The 3 months correlation between Dimensional and IShares is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and iShares SP Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Mid 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Mid has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and IShares SP go up and down completely randomly.

Pair Corralation between Dimensional ETF and IShares SP

Given the investment horizon of 90 days Dimensional ETF Trust is expected to generate 0.62 times more return on investment than IShares SP. However, Dimensional ETF Trust is 1.6 times less risky than IShares SP. It trades about -0.18 of its potential returns per unit of risk. iShares SP Mid Cap is currently generating about -0.23 per unit of risk. If you would invest  2,751  in Dimensional ETF Trust on October 9, 2024 and sell it today you would lose (65.00) from holding Dimensional ETF Trust or give up 2.36% 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 SP Mid Cap

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 SP Mid

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP Mid Cap are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking indicators, IShares SP is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Dimensional ETF and IShares SP

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

The idea behind Dimensional ETF Trust and iShares SP Mid Cap 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.