Correlation Between Us Small and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Us Small 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 Us Small and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Small Cap and Dow Jones Industrial, you can compare the effects of market volatilities on Us Small 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 Us Small with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Small and Dow Jones.
Diversification Opportunities for Us Small and Dow Jones
Almost no diversification
The 3 months correlation between DFSVX and Dow is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Us Small Cap 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 Us Small 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 Us Small Cap 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 Us Small i.e., Us Small and Dow Jones go up and down completely randomly.
Pair Corralation between Us Small and Dow Jones
Assuming the 90 days horizon Us Small Cap is expected to generate 1.78 times more return on investment than Dow Jones. However, Us Small is 1.78 times more volatile than Dow Jones Industrial. It trades about 0.08 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.11 per unit of risk. If you would invest 3,873 in Us Small Cap on August 28, 2024 and sell it today you would earn a total of 1,466 from holding Us Small Cap or generate 37.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Small Cap vs. Dow Jones Industrial
Performance |
| Timeline |
Us Small and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Us Small Cap
Pair trading matchups for Us Small
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Us Small and Dow Jones
The main advantage of trading using opposite Us Small and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Small 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.| Us Small vs. Us Micro Cap | Us Small vs. Dfa International Small | Us Small vs. Us Large Cap | Us Small vs. International Small Pany |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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