Correlation Between Dimensional Core and IShares Russell
Can any of the company-specific risk be diversified away by investing in both Dimensional Core and IShares Russell 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 Core and IShares Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Core Equity and iShares Russell 3000, you can compare the effects of market volatilities on Dimensional Core and IShares Russell 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 Core with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Core and IShares Russell.
Diversification Opportunities for Dimensional Core and IShares Russell
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and iShares Russell 3000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 3000 and Dimensional Core 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 Core Equity are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell 3000 has no effect on the direction of Dimensional Core i.e., Dimensional Core and IShares Russell go up and down completely randomly.
Pair Corralation between Dimensional Core and IShares Russell
Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 0.98 times more return on investment than IShares Russell. However, Dimensional Core Equity is 1.02 times less risky than IShares Russell. It trades about -0.14 of its potential returns per unit of risk. iShares Russell 3000 is currently generating about -0.15 per unit of risk. If you would invest 3,149 in Dimensional Core Equity on January 26, 2024 and sell it today you would lose (75.00) from holding Dimensional Core Equity or give up 2.38% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Dimensional Core Equity vs. iShares Russell 3000
Performance |
Timeline |
Dimensional Core Equity |
iShares Russell 3000 |
Dimensional Core and IShares Russell Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dimensional Core and IShares Russell
The main advantage of trading using opposite Dimensional Core and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core position performs unexpectedly, IShares Russell 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 Russell will offset losses from the drop in IShares Russell's long position.Dimensional Core vs. SPDR MSCI EAFE | Dimensional Core vs. SPDR MSCI Emerging | Dimensional Core vs. SPDR Russell 1000 | Dimensional Core vs. SPDR Russell 1000 |
IShares Russell vs. SPDR MSCI EAFE | IShares Russell vs. SPDR MSCI Emerging | IShares Russell vs. SPDR Russell 1000 | IShares Russell vs. SPDR Russell 1000 |
Check out your portfolio center.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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