Correlation Between Dow Jones and LIFE +
Can any of the company-specific risk be diversified away by investing in both Dow Jones and LIFE + 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 Dow Jones and LIFE + into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and LIFE BANC SPLIT, you can compare the effects of market volatilities on Dow Jones and LIFE + 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 Dow Jones with a short position of LIFE +. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and LIFE +.
Diversification Opportunities for Dow Jones and LIFE +
Very poor diversification
The 3 months correlation between Dow and LIFE is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and LIFE BANC SPLIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFE BANC SPLIT and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with LIFE +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFE BANC SPLIT has no effect on the direction of Dow Jones i.e., Dow Jones and LIFE + go up and down completely randomly.
Pair Corralation between Dow Jones and LIFE +
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.16 times less return on investment than LIFE +. But when comparing it to its historical volatility, Dow Jones Industrial is 2.71 times less risky than LIFE +. It trades about 0.21 of its potential returns per unit of risk. LIFE BANC SPLIT is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 550.00 in LIFE BANC SPLIT on August 25, 2024 and sell it today you would earn a total of 80.00 from holding LIFE BANC SPLIT or generate 14.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. LIFE BANC SPLIT
Performance |
| Timeline |
Dow Jones and LIFE + Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
LIFE BANC SPLIT
Pair trading matchups for LIFE +
Pair Trading with Dow Jones and LIFE +
The main advantage of trading using opposite Dow Jones and LIFE + positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, LIFE + 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 LIFE + will offset losses from the drop in LIFE +'s long position.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| LIFE + vs. Geely Automobile Holdings | LIFE + vs. UMC Electronics Co | LIFE + vs. METHODE ELECTRONICS | LIFE + vs. KIMBALL ELECTRONICS |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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