Correlation Between IShares Treasury and Dimensional ETF

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

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

Diversification Opportunities for IShares Treasury and Dimensional ETF

0.09

Correlation Coefficient

IShares Treasury  Dimensional ETF

Significant diversification

The 3 months correlation between IShares and Dimensional is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Floating and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust and IShares Treasury 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 Treasury Floating are associated (or correlated) with Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of IShares Treasury i.e., IShares Treasury and Dimensional ETF go up and down completely randomly.

Pair Corralation between IShares Treasury and Dimensional ETF

Given the investment horizon of 90 days iShares Treasury Floating is expected to generate 0.12 times more return on investment than Dimensional ETF. However, iShares Treasury Floating is 8.65 times less risky than Dimensional ETF. It trades about 1.08 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about -0.01 per unit of risk. If you would invest  4,994  in iShares Treasury Floating on September 15, 2024 and sell it today you would earn a total of  59.00  from holding iShares Treasury Floating or generate 1.18% return on investment over 90 days.

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

iShares Treasury Floating  vs.  Dimensional ETF Trust

iShares Treasury Floating

Risk-Adjusted Performance

84 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Treasury Floating are ranked lower than 84 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, IShares Treasury is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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 very healthy basic indicators, Dimensional ETF is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Treasury and Dimensional ETF

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

The idea behind iShares Treasury Floating and Dimensional ETF Trust 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.