Correlation Between IShares Russell and Dimensional Targeted

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

By analyzing existing cross correlation between iShares Russell 2000 and Dimensional Targeted Value, you can compare the effects of market volatilities on IShares Russell and Dimensional Targeted 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 Russell with a short position of Dimensional Targeted. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Dimensional Targeted.

Diversification Opportunities for IShares Russell and Dimensional Targeted

0.63

Correlation Coefficient

IShares Russell  Dimensional Targeted

Poor diversification

The 3 months correlation between IShares and Dimensional is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 2000 and Dimensional Targeted Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Targeted and IShares Russell 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 Russell 2000 are associated (or correlated) with Dimensional Targeted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Targeted has no effect on the direction of IShares Russell i.e., IShares Russell and Dimensional Targeted go up and down completely randomly.

Pair Corralation between IShares Russell and Dimensional Targeted

Considering the 90-day investment horizon iShares Russell 2000 is expected to generate 1.06 times more return on investment than Dimensional Targeted. However, IShares Russell is 1.06 times more volatile than Dimensional Targeted Value. It trades about 0.07 of its potential returns per unit of risk. Dimensional Targeted Value is currently generating about 0.02 per unit of risk. If you would invest  17,513  in iShares Russell 2000 on September 6, 2025 and sell it today you would earn a total of  884.00  from holding iShares Russell 2000 or generate 5.05% return on investment over 90 days.

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

iShares Russell 2000  vs.  Dimensional Targeted Value

iShares Russell 2000

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 2000 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Russell is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Dimensional Targeted

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Targeted Value are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Dimensional Targeted is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Russell and Dimensional Targeted

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

The idea behind iShares Russell 2000 and Dimensional Targeted Value 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .