Correlation Between Dimensional Retirement and American Funds
Can any of the company-specific risk be diversified away by investing in both Dimensional Retirement and American Funds 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 American Funds 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 American Funds Retirement, you can compare the effects of market volatilities on Dimensional Retirement and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Retirement and American Funds.
Diversification Opportunities for Dimensional Retirement and American Funds
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dimensional and American is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and American Funds Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Retirement 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Retirement has no effect on the direction of Dimensional Retirement i.e., Dimensional Retirement and American Funds go up and down completely randomly.
Pair Corralation between Dimensional Retirement and American Funds
Assuming the 90 days horizon Dimensional Retirement Income is expected to generate 0.55 times more return on investment than American Funds. However, Dimensional Retirement Income is 1.83 times less risky than American Funds. It trades about 0.15 of its potential returns per unit of risk. American Funds Retirement is currently generating about -0.01 per unit of risk. If you would invest 1,153 in Dimensional Retirement Income on August 28, 2024 and sell it today you would earn a total of 8.00 from holding Dimensional Retirement Income or generate 0.69% 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. American Funds Retirement
Performance |
| Timeline |
| Dimensional Retirement |
| American Funds Retirement |
Dimensional Retirement and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Retirement and American Funds
The main advantage of trading using opposite Dimensional Retirement and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Retirement position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Dimensional Retirement vs. Guidepath Managed Futures | Dimensional Retirement vs. Deutsche Global Inflation | Dimensional Retirement vs. Ab Bond Inflation | Dimensional Retirement vs. Aqr Managed Futures |
| American Funds vs. Blackrock Sm Cap | American Funds vs. Ips Strategic Capital | American Funds vs. Rbb Fund | American Funds vs. Archer Balanced Fund |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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