Correlation Between Dow Jones and Aberdeen Short
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Aberdeen Short 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 Aberdeen Short 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 Aberdeen Short Duration, you can compare the effects of market volatilities on Dow Jones and Aberdeen Short 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 Aberdeen Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Aberdeen Short.
Diversification Opportunities for Dow Jones and Aberdeen Short
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Aberdeen is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Aberdeen Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Short Duration 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 Aberdeen Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Short Duration has no effect on the direction of Dow Jones i.e., Dow Jones and Aberdeen Short go up and down completely randomly.
Pair Corralation between Dow Jones and Aberdeen Short
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 4.75 times more return on investment than Aberdeen Short. However, Dow Jones is 4.75 times more volatile than Aberdeen Short Duration. It trades about 0.16 of its potential returns per unit of risk. Aberdeen Short Duration is currently generating about 0.18 per unit of risk. If you would invest 3,857,103 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 633,962 from holding Dow Jones Industrial or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. Aberdeen Short Duration
Performance |
| Timeline |
Dow Jones and Aberdeen Short Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Aberdeen Short Duration
Pair trading matchups for Aberdeen Short
Pair Trading with Dow Jones and Aberdeen Short
The main advantage of trading using opposite Dow Jones and Aberdeen Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Aberdeen Short 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 Aberdeen Short will offset losses from the drop in Aberdeen Short's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Aberdeen Short vs. Us Government Securities | Aberdeen Short vs. Goldman Sachs Government | Aberdeen Short vs. Virtus Seix Government | Aberdeen Short vs. Franklin Government Money |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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