Correlation Between Dimensional Retirement and Northern International

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

Diversification Opportunities for Dimensional Retirement and Northern International

0.76

Correlation Coefficient

Dimensional Retirement  Northern International

Poor diversification

The 3 months correlation between Dimensional and Northern is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and Northern International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern International 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 Northern International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern International has no effect on the direction of Dimensional Retirement i.e., Dimensional Retirement and Northern International go up and down completely randomly.

Pair Corralation between Dimensional Retirement and Northern International

Assuming the 90 days horizon Dimensional Retirement is expected to generate 2.02 times less return on investment than Northern International. But when comparing it to its historical volatility, Dimensional Retirement Income is 2.67 times less risky than Northern International. It trades about 0.15 of its potential returns per unit of risk. Northern International Equity is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  983.00  in Northern International Equity on October 22, 2024 and sell it today you would earn a total of  12.00  from holding Northern International Equity or generate 1.22% 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.  Northern International Equity

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.

Northern International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Northern International 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 Northern International

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

The idea behind Dimensional Retirement Income and Northern International Equity 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 CEOs Directory module to screen CEOs from public companies around the world.