Correlation Between SOL TOP5 and Dow Jones
Can any of the company-specific risk be diversified away by investing in both SOL TOP5 and Dow Jones 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 SOL TOP5 and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOL TOP5 Blended and Dow Jones Industrial, you can compare the effects of market volatilities on SOL TOP5 and Dow Jones 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 SOL TOP5 with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOL TOP5 and Dow Jones.
Diversification Opportunities for SOL TOP5 and Dow Jones
Good diversification
The 3 months correlation between SOL and Dow is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding SOL TOP5 Blended and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and SOL TOP5 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 SOL TOP5 Blended are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of SOL TOP5 i.e., SOL TOP5 and Dow Jones go up and down completely randomly.
Pair Corralation between SOL TOP5 and Dow Jones
Assuming the 90 days trading horizon SOL TOP5 Blended is expected to under-perform the Dow Jones. But the etf apears to be less risky and, when comparing its historical volatility, SOL TOP5 Blended is 1.25 times less risky than Dow Jones. The etf trades about -0.02 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 4,239,227 in Dow Jones Industrial on November 3, 2024 and sell it today you would earn a total of 215,239 from holding Dow Jones Industrial or generate 5.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
SOL TOP5 Blended vs. Dow Jones Industrial
Performance |
| Timeline |
SOL TOP5 and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
SOL TOP5 Blended
Pair trading matchups for SOL TOP5
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with SOL TOP5 and Dow Jones
The main advantage of trading using opposite SOL TOP5 and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOL TOP5 position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| SOL TOP5 vs. SOL KRX Climate | SOL TOP5 vs. SOL K Global Semiconductor | SOL TOP5 vs. SOL SP500ESG | SOL TOP5 vs. SOL Total Bond |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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