Correlation Between Mesirow Financial and Dimensional Retirement

Can any of the company-specific risk be diversified away by investing in both Mesirow Financial and Dimensional Retirement 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 Mesirow Financial and Dimensional Retirement into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mesirow Financial Small and Dimensional Retirement Income, you can compare the effects of market volatilities on Mesirow Financial and Dimensional Retirement 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 Mesirow Financial with a short position of Dimensional Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mesirow Financial and Dimensional Retirement.

Diversification Opportunities for Mesirow Financial and Dimensional Retirement

0.83

Correlation Coefficient

Mesirow Financial  Dimensional Retirement

Very poor diversification

The 3 months correlation between Mesirow and Dimensional is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Mesirow Financial Small and Dimensional Retirement Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Retirement and Mesirow Financial 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 Mesirow Financial Small are associated (or correlated) with Dimensional Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Retirement has no effect on the direction of Mesirow Financial i.e., Mesirow Financial and Dimensional Retirement go up and down completely randomly.

Pair Corralation between Mesirow Financial and Dimensional Retirement

Assuming the 90 days horizon Mesirow Financial Small is expected to generate 5.54 times more return on investment than Dimensional Retirement. However, Mesirow Financial is 5.54 times more volatile than Dimensional Retirement Income. It trades about 0.04 of its potential returns per unit of risk. Dimensional Retirement Income is currently generating about 0.1 per unit of risk. If you would invest  1,133  in Mesirow Financial Small on October 9, 2024 and sell it today you would earn a total of  121.00  from holding Mesirow Financial Small or generate 10.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Mesirow Financial Small  vs.  Dimensional Retirement Income

Mesirow Financial Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mesirow Financial Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Dimensional Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional Retirement Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Dimensional Retirement is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mesirow Financial and Dimensional Retirement

The main advantage of trading using opposite Mesirow Financial and Dimensional Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesirow Financial position performs unexpectedly, Dimensional Retirement 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 Dimensional Retirement will offset losses from the drop in Dimensional Retirement's long position.

The idea behind Mesirow Financial Small and Dimensional Retirement Income 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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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 Global Correlations module to find global opportunities by holding instruments from different markets.