Correlation Between Dow Jones and Alger Emerging
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Alger Emerging 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 Alger Emerging 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 Alger Emerging Markets, you can compare the effects of market volatilities on Dow Jones and Alger Emerging 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 Alger Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Alger Emerging.
Diversification Opportunities for Dow Jones and Alger Emerging
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dow and Alger is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Alger Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Emerging Markets 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 Alger Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Emerging Markets has no effect on the direction of Dow Jones i.e., Dow Jones and Alger Emerging go up and down completely randomly.
Pair Corralation between Dow Jones and Alger Emerging
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.15 times more return on investment than Alger Emerging. However, Dow Jones is 1.15 times more volatile than Alger Emerging Markets. It trades about 0.25 of its potential returns per unit of risk. Alger Emerging Markets is currently generating about -0.21 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 233,449 from holding Dow Jones Industrial or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Alger Emerging Markets
Performance |
| Timeline |
Dow Jones and Alger Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Alger Emerging Markets
Pair trading matchups for Alger Emerging
Pair Trading with Dow Jones and Alger Emerging
The main advantage of trading using opposite Dow Jones and Alger Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Alger Emerging 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 Alger Emerging will offset losses from the drop in Alger Emerging's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Alger Emerging vs. Lgm Risk Managed | Alger Emerging vs. Copeland Risk Managed | Alger Emerging vs. Strategic Allocation Aggressive | Alger Emerging vs. Morningstar Aggressive Growth |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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