Correlation Between Dimensional Retirement and Swan Defined

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

Diversification Opportunities for Dimensional Retirement and Swan Defined

0.34

Correlation Coefficient

Dimensional Retirement  Swan Defined

Weak diversification

The 3 months correlation between Dimensional and Swan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and Swan Defined Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swan Defined Risk 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 Swan Defined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swan Defined Risk has no effect on the direction of Dimensional Retirement i.e., Dimensional Retirement and Swan Defined go up and down completely randomly.

Pair Corralation between Dimensional Retirement and Swan Defined

Assuming the 90 days horizon Dimensional Retirement Income is expected to generate 0.04 times more return on investment than Swan Defined. However, Dimensional Retirement Income is 23.32 times less risky than Swan Defined. It trades about 0.15 of its potential returns per unit of risk. Swan Defined Risk is currently generating about -0.14 per unit of risk. If you would invest  1,142  in Dimensional Retirement Income on December 21, 2024 and sell it today you would earn a total of  21.00  from holding Dimensional Retirement Income or generate 1.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	84.75%
Values	Daily Returns

Dimensional Retirement Income  vs.  Swan Defined Risk

Dimensional Retirement

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Retirement Income are ranked lower than 11 (%) 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.

Swan Defined Risk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swan Defined Risk has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Dimensional Retirement and Swan Defined

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

The idea behind Dimensional Retirement Income and Swan Defined Risk 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.