Correlation Between Dimensional Retirement and Multimanager Lifestyle
Can any of the company-specific risk be diversified away by investing in both Dimensional Retirement and Multimanager Lifestyle 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 Multimanager Lifestyle 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 Multimanager Lifestyle Moderate, you can compare the effects of market volatilities on Dimensional Retirement and Multimanager Lifestyle 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 Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Retirement and Multimanager Lifestyle.
Diversification Opportunities for Dimensional Retirement and Multimanager Lifestyle
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dimensional and MULTIMANAGER is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and Multimanager Lifestyle Moderat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle 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 Multimanager Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimanager Lifestyle has no effect on the direction of Dimensional Retirement i.e., Dimensional Retirement and Multimanager Lifestyle go up and down completely randomly.
Pair Corralation between Dimensional Retirement and Multimanager Lifestyle
Assuming the 90 days horizon Dimensional Retirement is expected to generate 1.41 times less return on investment than Multimanager Lifestyle. But when comparing it to its historical volatility, Dimensional Retirement Income is 1.58 times less risky than Multimanager Lifestyle. It trades about 0.15 of its potential returns per unit of risk. Multimanager Lifestyle Moderate is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,200 in Multimanager Lifestyle Moderate on September 2, 2024 and sell it today you would earn a total of 73.00 from holding Multimanager Lifestyle Moderate or generate 6.08% 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. Multimanager Lifestyle Moderat
Performance |
| Timeline |
| Dimensional Retirement |
| Multimanager Lifestyle |
Dimensional Retirement and Multimanager Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Retirement and Multimanager Lifestyle
The main advantage of trading using opposite Dimensional Retirement and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Retirement position performs unexpectedly, Multimanager Lifestyle 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 Multimanager Lifestyle will offset losses from the drop in Multimanager Lifestyle's long position.| Dimensional Retirement vs. Mesirow Financial High | Dimensional Retirement vs. Pace High Yield | Dimensional Retirement vs. Siit High Yield | Dimensional Retirement vs. Western Asset High |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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