Correlation Between Dimensional Retirement and Vanguard Long-term

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

Diversification Opportunities for Dimensional Retirement and Vanguard Long-term

0.81

Correlation Coefficient

Dimensional Retirement  Vanguard Long-term

Very poor diversification

The 3 months correlation between Dimensional and Vanguard is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and Vanguard Long Term Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Long Term 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 Vanguard Long-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Long Term has no effect on the direction of Dimensional Retirement i.e., Dimensional Retirement and Vanguard Long-term go up and down completely randomly.

Pair Corralation between Dimensional Retirement and Vanguard Long-term

Assuming the 90 days horizon Dimensional Retirement is expected to generate 1.54 times less return on investment than Vanguard Long-term. But when comparing it to its historical volatility, Dimensional Retirement Income is 2.67 times less risky than Vanguard Long-term. It trades about 0.1 of its potential returns per unit of risk. Vanguard Long Term Porate is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,471  in Vanguard Long Term Porate on December 31, 2024 and sell it today you would earn a total of  48.00  from holding Vanguard Long Term Porate or generate 1.94% return on investment over 90 days.

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

Dimensional Retirement Income  vs.  Vanguard Long Term Porate

Dimensional Retirement

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Retirement Income are ranked lower than 7 (%) 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.

Vanguard Long Term

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Long Term Porate are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Long-term 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 Vanguard Long-term

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

The idea behind Dimensional Retirement Income and Vanguard Long Term Porate 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.