Correlation Between Moderate Balanced and Dimensional Retirement

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

By analyzing existing cross correlation between Moderate Balanced Allocation and Dimensional Retirement Income, you can compare the effects of market volatilities on Moderate Balanced and Dimensional Retirement 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 Moderate Balanced with a short position of Dimensional Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderate Balanced and Dimensional Retirement.

Diversification Opportunities for Moderate Balanced and Dimensional Retirement

0.99

Correlation Coefficient

Moderate Balanced  Dimensional Retirement

No risk reduction

The 3 months correlation between Moderate and Dimensional is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Balanced Allocation and Dimensional Retirement Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Retirement and Moderate Balanced 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 Moderate Balanced Allocation are associated (or correlated) with Dimensional Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Retirement has no effect on the direction of Moderate Balanced i.e., Moderate Balanced and Dimensional Retirement go up and down completely randomly.

Pair Corralation between Moderate Balanced and Dimensional Retirement

Assuming the 90 days horizon Moderate Balanced Allocation is expected to generate 2.54 times more return on investment than Dimensional Retirement. However, Moderate Balanced is 2.54 times more volatile than Dimensional Retirement Income. It trades about 0.24 of its potential returns per unit of risk. Dimensional Retirement Income is currently generating about 0.35 per unit of risk. If you would invest  1,183  in Moderate Balanced Allocation on May 21, 2025 and sell it today you would earn a total of  76.00  from holding Moderate Balanced Allocation or generate 6.42% return on investment over 90 days.

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

Moderate Balanced Allocation  vs.  Dimensional Retirement Income

Moderate Balanced

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Moderate Balanced Allocation are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Moderate Balanced may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Dimensional Retirement

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Retirement Income are ranked lower than 27 (%) 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.

Pair Trading with Moderate Balanced and Dimensional Retirement

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

The idea behind Moderate Balanced Allocation and Dimensional Retirement Income 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.