Correlation Between Dividend and Dividend Growth

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Dividend and Dividend Growth 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 Dividend and Dividend Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dividend 15 Split and Dividend Growth Split, you can compare the effects of market volatilities on Dividend and Dividend Growth 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 Dividend with a short position of Dividend Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend and Dividend Growth.

Diversification Opportunities for Dividend and Dividend Growth

DividendDividendDiversified AwayDividendDividendDiversified Away100%
0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Dividend and Dividend is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dividend 15 Split and Dividend Growth Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dividend Growth Split and Dividend 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 Dividend 15 Split are associated (or correlated) with Dividend Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dividend Growth Split has no effect on the direction of Dividend i.e., Dividend and Dividend Growth go up and down completely randomly.

Pair Corralation between Dividend and Dividend Growth

Assuming the 90 days trading horizon Dividend is expected to generate 1.82 times less return on investment than Dividend Growth. But when comparing it to its historical volatility, Dividend 15 Split is 1.41 times less risky than Dividend Growth. It trades about 0.3 of its potential returns per unit of risk. Dividend Growth Split is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  1,070  in Dividend Growth Split on November 25, 2024 and sell it today you would earn a total of  37.00  from holding Dividend Growth Split or generate 3.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Dividend 15 Split  vs.  Dividend Growth Split

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -1012345
JavaScript chart by amCharts 3.21.15DFN-PA DGS-PA
       Timeline  
Dividend 15 Split 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Dividend 15 Split are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dividend is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb10.410.510.610.710.8
Dividend Growth Split 

Risk-Adjusted Performance

Strong

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Dividend Growth Split are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Dividend Growth may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb10.310.410.510.610.710.810.91111.1

Dividend and Dividend Growth Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.05-0.75-0.45-0.150.0048350.180.480.781.081.38 0.51.01.52.02.53.03.5
JavaScript chart by amCharts 3.21.15DFN-PA DGS-PA
       Returns  

Pair Trading with Dividend and Dividend Growth

The main advantage of trading using opposite Dividend and Dividend Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dividend position performs unexpectedly, Dividend Growth 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 Dividend Growth will offset losses from the drop in Dividend Growth's long position.
The idea behind Dividend 15 Split and Dividend Growth Split 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

Other Complementary Tools

Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites
Odds Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Portfolio Suggestion
Get suggestions outside of your existing asset allocation including your own model portfolios
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance