Correlation Between Dimensional Retirement and Inflation Protected
Can any of the company-specific risk be diversified away by investing in both Dimensional Retirement and Inflation Protected 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 Inflation Protected 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 Inflation Protected Bond Fund, you can compare the effects of market volatilities on Dimensional Retirement and Inflation Protected 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 Inflation Protected. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Retirement and Inflation Protected.
Diversification Opportunities for Dimensional Retirement and Inflation Protected
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dimensional and Inflation is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and Inflation Protected Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Protected 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 Inflation Protected. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Protected has no effect on the direction of Dimensional Retirement i.e., Dimensional Retirement and Inflation Protected go up and down completely randomly.
Pair Corralation between Dimensional Retirement and Inflation Protected
Assuming the 90 days horizon Dimensional Retirement Income is expected to generate 0.44 times more return on investment than Inflation Protected. However, Dimensional Retirement Income is 2.28 times less risky than Inflation Protected. It trades about 0.34 of its potential returns per unit of risk. Inflation Protected Bond Fund is currently generating about 0.12 per unit of risk. If you would invest 1,142 in Dimensional Retirement Income on November 3, 2024 and sell it today you would earn a total of 16.00 from holding Dimensional Retirement Income or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Retirement Income vs. Inflation Protected Bond Fund
Performance |
| Timeline |
| Dimensional Retirement |
| Inflation Protected |
Dimensional Retirement and Inflation Protected Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Retirement and Inflation Protected
The main advantage of trading using opposite Dimensional Retirement and Inflation Protected positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Retirement position performs unexpectedly, Inflation Protected 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 Inflation Protected will offset losses from the drop in Inflation Protected's long position.The idea behind Dimensional Retirement Income and Inflation Protected Bond Fund 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.
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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