Correlation Between Dimensional Retirement and Prudential Real
Can any of the company-specific risk be diversified away by investing in both Dimensional Retirement and Prudential Real 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 Prudential Real 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 Prudential Real Estate, you can compare the effects of market volatilities on Dimensional Retirement and Prudential Real 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 Prudential Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Retirement and Prudential Real.
Diversification Opportunities for Dimensional Retirement and Prudential Real
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dimensional and Prudential is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and Prudential Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Real Estate 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 Prudential Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Real Estate has no effect on the direction of Dimensional Retirement i.e., Dimensional Retirement and Prudential Real go up and down completely randomly.
Pair Corralation between Dimensional Retirement and Prudential Real
Assuming the 90 days horizon Dimensional Retirement is expected to generate 1.7 times less return on investment than Prudential Real. But when comparing it to its historical volatility, Dimensional Retirement Income is 5.73 times less risky than Prudential Real. It trades about 0.32 of its potential returns per unit of risk. Prudential Real Estate is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,520 in Prudential Real Estate on November 6, 2024 and sell it today you would earn a total of 30.00 from holding Prudential Real Estate or generate 1.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional Retirement Income vs. Prudential Real Estate
Performance |
| Timeline |
| Dimensional Retirement |
| Prudential Real Estate |
Dimensional Retirement and Prudential Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Retirement and Prudential Real
The main advantage of trading using opposite Dimensional Retirement and Prudential Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Retirement position performs unexpectedly, Prudential Real 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 Prudential Real will offset losses from the drop in Prudential Real's long position.The idea behind Dimensional Retirement Income and Prudential Real Estate 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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