Correlation Between Ultra-small Company and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Ultra-small Company 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 Ultra-small Company and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Small Pany Fund and Dow Jones Industrial, you can compare the effects of market volatilities on Ultra-small Company 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 Ultra-small Company with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra-small Company and Dow Jones.
Diversification Opportunities for Ultra-small Company and Dow Jones
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Ultra-small and Dow is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Small Pany Fund 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 Ultra-small Company 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 Ultra Small Pany Fund 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 Ultra-small Company i.e., Ultra-small Company and Dow Jones go up and down completely randomly.
Pair Corralation between Ultra-small Company and Dow Jones
Assuming the 90 days horizon Ultra-small Company is expected to generate 1.04 times less return on investment than Dow Jones. In addition to that, Ultra-small Company is 1.92 times more volatile than Dow Jones Industrial. It trades about 0.06 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of volatility. If you would invest 3,889,280 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 601,785 from holding Dow Jones Industrial or generate 15.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Small Pany Fund vs. Dow Jones Industrial
Performance |
| Timeline |
Ultra-small Company and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Ultra Small Pany Fund
Pair trading matchups for Ultra-small Company
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Ultra-small Company and Dow Jones
The main advantage of trading using opposite Ultra-small Company and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra-small Company 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.| Ultra-small Company vs. Prudential Jennison International | Ultra-small Company vs. Fidelity New Markets | Ultra-small Company vs. Ohio Variable College |
| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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