Correlation Between Dimensional 2040 and Dfa Inflation

Can any of the company-specific risk be diversified away by investing in both Dimensional 2040 and Dfa Inflation 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 2040 and Dfa Inflation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dimensional 2040 Target and Dfa Inflation Protected, you can compare the effects of market volatilities on Dimensional 2040 and Dfa Inflation 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 2040 with a short position of Dfa Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional 2040 and Dfa Inflation.

Diversification Opportunities for Dimensional 2040 and Dfa Inflation

-0.02

Correlation Coefficient

Dimensional 2040  Dfa Inflation

Good diversification

The 3 months correlation between Dimensional and Dfa is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional 2040 Target and Dfa Inflation Protected in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Inflation Protected and Dimensional 2040 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 2040 Target are associated (or correlated) with Dfa Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Inflation Protected has no effect on the direction of Dimensional 2040 i.e., Dimensional 2040 and Dfa Inflation go up and down completely randomly.

Pair Corralation between Dimensional 2040 and Dfa Inflation

Assuming the 90 days horizon Dimensional 2040 Target is expected to generate 1.76 times more return on investment than Dfa Inflation. However, Dimensional 2040 is 1.76 times more volatile than Dfa Inflation Protected. It trades about 0.13 of its potential returns per unit of risk. Dfa Inflation Protected is currently generating about 0.08 per unit of risk. If you would invest  1,391  in Dimensional 2040 Target on September 4, 2024 and sell it today you would earn a total of  263.00  from holding Dimensional 2040 Target or generate 18.91% return on investment over 90 days.

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

Dimensional 2040 Target  vs.  Dfa Inflation Protected

Dimensional 2040 Target

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional 2040 Target are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Dimensional 2040 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dfa Inflation Protected

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dfa Inflation Protected has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dfa Inflation 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 2040 and Dfa Inflation

The main advantage of trading using opposite Dimensional 2040 and Dfa Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional 2040 position performs unexpectedly, Dfa Inflation 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 Dfa Inflation will offset losses from the drop in Dfa Inflation's long position.

The idea behind Dimensional 2040 Target and Dfa Inflation Protected 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.