Correlation Between IShares Trust and Dimensional Core
Can any of the company-specific risk be diversified away by investing in both IShares Trust and Dimensional Core 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 Trust and Dimensional Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and Dimensional Core Equity, you can compare the effects of market volatilities on IShares Trust and Dimensional Core 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 Trust with a short position of Dimensional Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Dimensional Core.
Diversification Opportunities for IShares Trust and Dimensional Core
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Dimensional is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Dimensional Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Core Equity and IShares Trust 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 Trust are associated (or correlated) with Dimensional Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Core Equity has no effect on the direction of IShares Trust i.e., IShares Trust and Dimensional Core go up and down completely randomly.
Pair Corralation between IShares Trust and Dimensional Core
Given the investment horizon of 90 days iShares Trust is expected to generate 0.63 times more return on investment than Dimensional Core. However, iShares Trust is 1.6 times less risky than Dimensional Core. It trades about 0.06 of its potential returns per unit of risk. Dimensional Core Equity is currently generating about -0.01 per unit of risk. If you would invest 3,191 in iShares Trust on March 19, 2025 and sell it today you would earn a total of 21.00 from holding iShares Trust or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Trust vs. Dimensional Core Equity
Performance |
| Timeline |
| iShares Trust |
| Dimensional Core Equity |
IShares Trust and Dimensional Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and Dimensional Core
The main advantage of trading using opposite IShares Trust and Dimensional Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, Dimensional Core 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 Core will offset losses from the drop in Dimensional Core's long position.| IShares Trust vs. First Trust Multi Asset | IShares Trust vs. Collaborative Investment Series | IShares Trust vs. Northern Lights | IShares Trust vs. Arrow DWA Tactical |
| Dimensional Core vs. Dimensional World ex | Dimensional Core vs. Dimensional Small Cap | Dimensional Core vs. Dimensional Core Equity | Dimensional Core vs. Dimensional Equity ETF |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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