Correlation Between Dimensional International and IShares International

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

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

Diversification Opportunities for Dimensional International and IShares International

0.78

Correlation Coefficient

Dimensional International  IShares International

Poor diversification

The 3 months correlation between Dimensional and IShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International Valu and iShares International Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares International and Dimensional International 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 International Value are associated (or correlated) with IShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares International has no effect on the direction of Dimensional International i.e., Dimensional International and IShares International go up and down completely randomly.

Pair Corralation between Dimensional International and IShares International

Given the investment horizon of 90 days Dimensional International Value is expected to under-perform the IShares International. But the etf apears to be less risky and, when comparing its historical volatility, Dimensional International Value is 1.12 times less risky than IShares International. The etf trades about 0.0 of its potential returns per unit of risk. The iShares International Select is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,795  in iShares International Select on January 30, 2024 and sell it today you would earn a total of  11.00  from holding iShares International Select or generate 0.39% return on investment over 90 days.

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

Dimensional International Valu  vs.  iShares International Select

Dimensional International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional International Value are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, Dimensional International may actually be approaching a critical reversion point that can send shares even higher in May 2024.

iShares International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares International Select are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, IShares International is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Dimensional International and IShares International

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

The idea behind Dimensional International Value and iShares International Select 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.