Correlation Between Dimensional Retirement and Destinations Municipal
Can any of the company-specific risk be diversified away by investing in both Dimensional Retirement and Destinations Municipal 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 Destinations Municipal 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 Destinations Municipal Fixed, you can compare the effects of market volatilities on Dimensional Retirement and Destinations Municipal 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 Destinations Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Retirement and Destinations Municipal.
Diversification Opportunities for Dimensional Retirement and Destinations Municipal
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dimensional and Destinations is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and Destinations Municipal Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Municipal 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 Destinations Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Municipal has no effect on the direction of Dimensional Retirement i.e., Dimensional Retirement and Destinations Municipal go up and down completely randomly.
Pair Corralation between Dimensional Retirement and Destinations Municipal
Assuming the 90 days horizon Dimensional Retirement Income is expected to under-perform the Destinations Municipal. In addition to that, Dimensional Retirement is 1.16 times more volatile than Destinations Municipal Fixed. It trades about -0.09 of its total potential returns per unit of risk. Destinations Municipal Fixed is currently generating about -0.1 per unit of volatility. If you would invest 976.00 in Destinations Municipal Fixed on October 5, 2024 and sell it today you would lose (13.00) from holding Destinations Municipal Fixed or give up 1.33% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Dimensional Retirement Income vs. Destinations Municipal Fixed
Performance |
Timeline |
Dimensional Retirement |
Destinations Municipal |
Dimensional Retirement and Destinations Municipal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dimensional Retirement and Destinations Municipal
The main advantage of trading using opposite Dimensional Retirement and Destinations Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Retirement position performs unexpectedly, Destinations Municipal 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 Destinations Municipal will offset losses from the drop in Destinations Municipal's long position.The idea behind Dimensional Retirement Income and Destinations Municipal Fixed 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |