Correlation Between Dimensional Retirement and Managed Account

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

Diversification Opportunities for Dimensional Retirement and Managed Account

0.68

Correlation Coefficient

Dimensional Retirement  Managed Account

Poor diversification

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

Pair Corralation between Dimensional Retirement and Managed Account

Assuming the 90 days horizon Dimensional Retirement Income is expected to under-perform the Managed Account. In addition to that, Dimensional Retirement is 1.54 times more volatile than Managed Account Series. It trades about -0.36 of its total potential returns per unit of risk. Managed Account Series is currently generating about -0.43 per unit of volatility. If you would invest  901.00  in Managed Account Series on October 10, 2024 and sell it today you would lose (15.00) from holding Managed Account Series or give up 1.66% of portfolio value over 90 days.

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

Dimensional Retirement Income  vs.  Managed Account Series

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.

Managed Account Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Managed Account Series has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Managed Account 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 Managed Account

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

The idea behind Dimensional Retirement Income and Managed Account Series 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.