Correlation Between Dimensional Retirement and Columbia Moderate

Can any of the company-specific risk be diversified away by investing in both Dimensional Retirement and Columbia Moderate 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 Columbia Moderate 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 Columbia Moderate Growth, you can compare the effects of market volatilities on Dimensional Retirement and Columbia Moderate 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 Columbia Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Retirement and Columbia Moderate.

Diversification Opportunities for Dimensional Retirement and Columbia Moderate

0.68

Correlation Coefficient

Dimensional Retirement  Columbia Moderate

Poor diversification

The 3 months correlation between Dimensional and Columbia is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and Columbia Moderate Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Moderate 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 Columbia Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Moderate Growth has no effect on the direction of Dimensional Retirement i.e., Dimensional Retirement and Columbia Moderate go up and down completely randomly.

Pair Corralation between Dimensional Retirement and Columbia Moderate

Assuming the 90 days horizon Dimensional Retirement is expected to generate 12.58 times less return on investment than Columbia Moderate. But when comparing it to its historical volatility, Dimensional Retirement Income is 2.3 times less risky than Columbia Moderate. It trades about 0.02 of its potential returns per unit of risk. Columbia Moderate Growth is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,998  in Columbia Moderate Growth on September 14, 2024 and sell it today you would earn a total of  136.00  from holding Columbia Moderate Growth or generate 3.4% 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.  Columbia Moderate Growth

Dimensional Retirement

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Retirement Income are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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.

Columbia Moderate Growth

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Moderate Growth are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dimensional Retirement and Columbia Moderate

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

The idea behind Dimensional Retirement Income and Columbia Moderate Growth 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.