Correlation Between IShares MSCI and Dimensional Global

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

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

Diversification Opportunities for IShares MSCI and Dimensional Global

-0.04

Correlation Coefficient

IShares MSCI  Dimensional Global

Good diversification

The 3 months correlation between IShares and Dimensional is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Emerging and Dimensional Global Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Global Value and IShares MSCI 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 MSCI Emerging are associated (or correlated) with Dimensional Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Global Value has no effect on the direction of IShares MSCI i.e., IShares MSCI and Dimensional Global go up and down completely randomly.

Pair Corralation between IShares MSCI and Dimensional Global

Assuming the 90 days trading horizon IShares MSCI is expected to generate 5.74 times less return on investment than Dimensional Global. In addition to that, IShares MSCI is 1.08 times more volatile than Dimensional Global Value. It trades about 0.03 of its total potential returns per unit of risk. Dimensional Global Value is currently generating about 0.21 per unit of volatility. If you would invest  2,363  in Dimensional Global Value on October 24, 2024 and sell it today you would earn a total of  178.00  from holding Dimensional Global Value or generate 7.53% return on investment over 90 days.

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

iShares MSCI Emerging  vs.  Dimensional Global Value

iShares MSCI Emerging

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Emerging are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Dimensional Global Value

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Global Value are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Dimensional Global may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with IShares MSCI and Dimensional Global

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

The idea behind iShares MSCI Emerging and Dimensional Global Value 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.