Correlation Between State Street and Dimensional Retirement
Can any of the company-specific risk be diversified away by investing in both State Street 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 State Street and Dimensional Retirement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Target and Dimensional Retirement Income, you can compare the effects of market volatilities on State Street 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 State Street with a short position of Dimensional Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Dimensional Retirement.
Diversification Opportunities for State Street and Dimensional Retirement
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between State and Dimensional is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target and Dimensional Retirement Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Retirement and State Street 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 State Street Target 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 State Street i.e., State Street and Dimensional Retirement go up and down completely randomly.
Pair Corralation between State Street and Dimensional Retirement
Assuming the 90 days horizon State Street Target is expected to generate 3.2 times more return on investment than Dimensional Retirement. However, State Street is 3.2 times more volatile than Dimensional Retirement Income. It trades about 0.1 of its potential returns per unit of risk. Dimensional Retirement Income is currently generating about 0.16 per unit of risk. If you would invest 1,540 in State Street Target on September 1, 2024 and sell it today you would earn a total of 145.00 from holding State Street Target or generate 9.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
State Street Target vs. Dimensional Retirement Income
Performance |
| Timeline |
| State Street Target |
| Dimensional Retirement |
State Street and Dimensional Retirement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Dimensional Retirement
The main advantage of trading using opposite State Street and Dimensional Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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.| State Street vs. American Funds Retirement | State Street vs. Fidelity Managed Retirement | State Street vs. Multimanager Lifestyle Moderate | State Street vs. Dimensional Retirement Income |
| Dimensional Retirement vs. Qs Large Cap | Dimensional Retirement vs. Fundamental Large Cap | Dimensional Retirement vs. John Hancock Investment | Dimensional Retirement vs. Virtus Nfj Large Cap |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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