Correlation Between All American and Dow Jones
Can any of the company-specific risk be diversified away by investing in both All American 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 All American and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between All American Gld and Dow Jones Industrial, you can compare the effects of market volatilities on All American 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 All American with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of All American and Dow Jones.
Diversification Opportunities for All American and Dow Jones
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between All and Dow is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding All American Gld 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 All American 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 All American Gld 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 All American i.e., All American and Dow Jones go up and down completely randomly.
Pair Corralation between All American and Dow Jones
Given the investment horizon of 90 days All American Gld is expected to generate 15.16 times more return on investment than Dow Jones. However, All American is 15.16 times more volatile than Dow Jones Industrial. It trades about 0.1 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of risk. If you would invest 0.05 in All American Gld on August 30, 2024 and sell it today you would earn a total of 0.05 from holding All American Gld or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
All American Gld vs. Dow Jones Industrial
Performance |
| Timeline |
All American and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
All American Gld
Pair trading matchups for All American
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with All American and Dow Jones
The main advantage of trading using opposite All American and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if All American 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.| All American vs. Green Planet Bio | All American vs. Azure Holding Group | All American vs. Four Leaf Acquisition | All American vs. Opus Magnum Ameris |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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