Correlation Between IShares Currency and Dimensional International

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

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

Diversification Opportunities for IShares Currency and Dimensional International

0.15

Correlation Coefficient

IShares Currency  Dimensional International

Average diversification

The 3 months correlation between IShares and Dimensional is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding iShares Currency Hedged and Dimensional International Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional International and IShares Currency 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 Currency Hedged are associated (or correlated) with Dimensional International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional International has no effect on the direction of IShares Currency i.e., IShares Currency and Dimensional International go up and down completely randomly.

Pair Corralation between IShares Currency and Dimensional International

Given the investment horizon of 90 days IShares Currency is expected to generate 1.08 times less return on investment than Dimensional International. In addition to that, IShares Currency is 1.02 times more volatile than Dimensional International Core. It trades about 0.17 of its total potential returns per unit of risk. Dimensional International Core is currently generating about 0.19 per unit of volatility. If you would invest  2,561  in Dimensional International Core on October 20, 2024 and sell it today you would earn a total of  51.00  from holding Dimensional International Core or generate 1.99% return on investment over 90 days.

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

iShares Currency Hedged  vs.  Dimensional International Core

iShares Currency Hedged

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Currency Hedged are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, IShares Currency is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dimensional International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional International Core has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Dimensional International is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Currency and Dimensional International

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

The idea behind iShares Currency Hedged and Dimensional International 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.