Correlation Between Dimensional Retirement and Inverse Nasdaq

Can any of the company-specific risk be diversified away by investing in both Dimensional Retirement and Inverse Nasdaq 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 Inverse Nasdaq 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 Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Dimensional Retirement and Inverse Nasdaq 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 Inverse Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Retirement and Inverse Nasdaq.

Diversification Opportunities for Dimensional Retirement and Inverse Nasdaq

0.46

Correlation Coefficient

Dimensional Retirement  Inverse Nasdaq

Very weak diversification

The 3 months correlation between Dimensional and Inverse is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Retirement Income and Inverse Nasdaq 100 Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Nasdaq 100 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 Inverse Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Nasdaq 100 has no effect on the direction of Dimensional Retirement i.e., Dimensional Retirement and Inverse Nasdaq go up and down completely randomly.

Pair Corralation between Dimensional Retirement and Inverse Nasdaq

Assuming the 90 days horizon Dimensional Retirement Income is expected to generate 0.17 times more return on investment than Inverse Nasdaq. However, Dimensional Retirement Income is 5.77 times less risky than Inverse Nasdaq. It trades about -0.05 of its potential returns per unit of risk. Inverse Nasdaq 100 Strategy is currently generating about -0.21 per unit of risk. If you would invest  1,153  in Dimensional Retirement Income on September 26, 2024 and sell it today you would lose (7.00) from holding Dimensional Retirement Income or give up 0.61% of portfolio value over 90 days.

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

Dimensional Retirement Income  vs.  Inverse Nasdaq 100 Strategy

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.

Inverse Nasdaq 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inverse Nasdaq 100 Strategy 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 fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Dimensional Retirement and Inverse Nasdaq

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

The idea behind Dimensional Retirement Income and Inverse Nasdaq 100 Strategy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.