Correlation Between Dimensional ETF and IShares Trust

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

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

Diversification Opportunities for Dimensional ETF and IShares Trust

-0.29

Correlation Coefficient

Dimensional ETF  IShares Trust

Very good diversification

The 3 months correlation between Dimensional and IShares is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Dimensional ETF 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 ETF Trust are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and IShares Trust go up and down completely randomly.

Pair Corralation between Dimensional ETF and IShares Trust

Given the investment horizon of 90 days Dimensional ETF Trust is expected to generate 0.28 times more return on investment than IShares Trust. However, Dimensional ETF Trust is 3.54 times less risky than IShares Trust. It trades about 0.09 of its potential returns per unit of risk. iShares Trust is currently generating about -0.01 per unit of risk. If you would invest  4,079  in Dimensional ETF Trust on February 9, 2025 and sell it today you would earn a total of  90.00  from holding Dimensional ETF Trust or generate 2.21% return on investment over 90 days.

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

Dimensional ETF Trust  vs.  iShares Trust

Dimensional ETF Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional ETF Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Dimensional ETF is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

iShares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dimensional ETF and IShares Trust

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

The idea behind Dimensional ETF Trust and iShares 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.