Correlation Between American Funds and Dimensional Retirement
Can any of the company-specific risk be diversified away by investing in both American Funds and Dimensional Retirement 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 American Funds and Dimensional Retirement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Retirement and Dimensional Retirement Income, you can compare the effects of market volatilities on American Funds and Dimensional Retirement 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 American Funds with a short position of Dimensional Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Dimensional Retirement.
Diversification Opportunities for American Funds and Dimensional Retirement
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Dimensional is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Dimensional Retirement Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Retirement and American Funds 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 American Funds Retirement are associated (or correlated) with Dimensional Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Retirement has no effect on the direction of American Funds i.e., American Funds and Dimensional Retirement go up and down completely randomly.
Pair Corralation between American Funds and Dimensional Retirement
Assuming the 90 days horizon American Funds Retirement is expected to under-perform the Dimensional Retirement. In addition to that, American Funds is 1.83 times more volatile than Dimensional Retirement Income. It trades about -0.01 of its total potential returns per unit of risk. Dimensional Retirement Income is currently generating about 0.15 per unit of volatility. If you would invest 1,153 in Dimensional Retirement Income on August 28, 2024 and sell it today you would earn a total of 8.00 from holding Dimensional Retirement Income or generate 0.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Retirement vs. Dimensional Retirement Income
Performance |
| Timeline |
| American Funds Retirement |
| Dimensional Retirement |
American Funds and Dimensional Retirement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Dimensional Retirement
The main advantage of trading using opposite American Funds and Dimensional Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Dimensional Retirement 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 Retirement will offset losses from the drop in Dimensional Retirement's long position.| American Funds vs. Blackrock Sm Cap | American Funds vs. Ips Strategic Capital | American Funds vs. Rbb Fund | American Funds vs. Archer Balanced Fund |
| Dimensional Retirement vs. Guidepath Managed Futures | Dimensional Retirement vs. Deutsche Global Inflation | Dimensional Retirement vs. Ab Bond Inflation | Dimensional Retirement vs. Aqr Managed Futures |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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