Correlation Between Dimensional Retirement and Fidelity Income
Can any of the company-specific risk be diversified away by investing in both Dimensional Retirement and Fidelity Income 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 Retirement and Fidelity Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Retirement Income and Fidelity Income Replacement, you can compare the effects of market volatilities on Dimensional Retirement and Fidelity Income 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 Retirement with a short position of Fidelity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Retirement and Fidelity Income.
Diversification Opportunities for Dimensional Retirement and Fidelity Income
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and Fidelity is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and Fidelity Income Replacement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Income Repl and Dimensional Retirement 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 Retirement Income are associated (or correlated) with Fidelity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Income Repl has no effect on the direction of Dimensional Retirement i.e., Dimensional Retirement and Fidelity Income go up and down completely randomly.
Pair Corralation between Dimensional Retirement and Fidelity Income
Assuming the 90 days horizon Dimensional Retirement Income is expected to generate 0.66 times more return on investment than Fidelity Income. However, Dimensional Retirement Income is 1.51 times less risky than Fidelity Income. It trades about 0.05 of its potential returns per unit of risk. Fidelity Income Replacement is currently generating about 0.01 per unit of risk. If you would invest 1,145 in Dimensional Retirement Income on October 25, 2024 and sell it today you would earn a total of 8.00 from holding Dimensional Retirement Income or generate 0.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Retirement Income vs. Fidelity Income Replacement
Performance |
| Timeline |
| Dimensional Retirement |
| Fidelity Income Repl |
Dimensional Retirement and Fidelity Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Retirement and Fidelity Income
The main advantage of trading using opposite Dimensional Retirement and Fidelity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Retirement position performs unexpectedly, Fidelity Income 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 Fidelity Income will offset losses from the drop in Fidelity Income's long position.The idea behind Dimensional Retirement Income and Fidelity Income Replacement 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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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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