Correlation Between Dimensional Retirement and Large-cap Growth
Can any of the company-specific risk be diversified away by investing in both Dimensional Retirement and Large-cap Growth 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 Large-cap Growth 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 Large Cap Growth Profund, you can compare the effects of market volatilities on Dimensional Retirement and Large-cap Growth 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 Large-cap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Retirement and Large-cap Growth.
Diversification Opportunities for Dimensional Retirement and Large-cap Growth
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dimensional and LARGE-CAP is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and Large Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth 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 Large-cap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Growth has no effect on the direction of Dimensional Retirement i.e., Dimensional Retirement and Large-cap Growth go up and down completely randomly.
Pair Corralation between Dimensional Retirement and Large-cap Growth
Assuming the 90 days horizon Dimensional Retirement is expected to generate 3.97 times less return on investment than Large-cap Growth. But when comparing it to its historical volatility, Dimensional Retirement Income is 3.95 times less risky than Large-cap Growth. It trades about 0.1 of its potential returns per unit of risk. Large Cap Growth Profund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,904 in Large Cap Growth Profund on October 30, 2024 and sell it today you would earn a total of 1,687 from holding Large Cap Growth Profund or generate 58.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Retirement Income vs. Large Cap Growth Profund
Performance |
| Timeline |
| Dimensional Retirement |
| Large Cap Growth |
Dimensional Retirement and Large-cap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Retirement and Large-cap Growth
The main advantage of trading using opposite Dimensional Retirement and Large-cap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Retirement position performs unexpectedly, Large-cap Growth 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 Large-cap Growth will offset losses from the drop in Large-cap Growth's long position.| Dimensional Retirement vs. Cref Money Market | Dimensional Retirement vs. Putnam Money Market | Dimensional Retirement vs. Aig Government Money | Dimensional Retirement vs. Hewitt Money Market |
| Large-cap Growth vs. Access Flex High | Large-cap Growth vs. Aggressive Balanced Allocation | Large-cap Growth vs. Ab High Income | Large-cap Growth vs. Prudential High Yield |
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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