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 2025, 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
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dimensional and American is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and American Funds 2025 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2025 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 2025 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 is expected to generate 187.67 times less return on investment than American Funds. But when comparing it to its historical volatility, Dimensional Retirement Income is 1.11 times less risky than American Funds. It trades about 0.0 of its potential returns per unit of risk. American Funds 2025 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,610 in American Funds 2025 on September 15, 2024 and sell it today you would earn a total of 19.00 from holding American Funds 2025 or generate 1.18% 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 2025
Performance |
| Timeline |
| Dimensional Retirement |
| American Funds 2025 |
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. Intal High Relative | Dimensional Retirement vs. Dfa International | Dimensional Retirement vs. Dfa Inflation Protected | Dimensional Retirement vs. Dfa International Small |
| American Funds vs. Qs Moderate Growth | American Funds vs. Pro Blend Moderate Term | American Funds vs. Calvert Moderate Allocation | American Funds vs. Dimensional Retirement Income |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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