Correlation Between IShares ESG and Dimensional World

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

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

Diversification Opportunities for IShares ESG and Dimensional World

0.94

Correlation Coefficient

IShares ESG  Dimensional World

Almost no diversification

The 3 months correlation between IShares and Dimensional is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Dimensional World ex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional World and IShares ESG 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 ESG Aware are associated (or correlated) with Dimensional World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional World has no effect on the direction of IShares ESG i.e., IShares ESG and Dimensional World go up and down completely randomly.

Pair Corralation between IShares ESG and Dimensional World

Given the investment horizon of 90 days IShares ESG is expected to generate 2.5 times less return on investment than Dimensional World. In addition to that, IShares ESG is 1.23 times more volatile than Dimensional World ex. It trades about 0.06 of its total potential returns per unit of risk. Dimensional World ex is currently generating about 0.19 per unit of volatility. If you would invest  2,716  in Dimensional World ex on May 4, 2025 and sell it today you would earn a total of  211.00  from holding Dimensional World ex or generate 7.77% return on investment over 90 days.

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

iShares ESG Aware  vs.  Dimensional World ex

iShares ESG Aware

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Dimensional World

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional World ex are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Dimensional World may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with IShares ESG and Dimensional World

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

The idea behind iShares ESG Aware and Dimensional World ex 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.