Correlation Between Dow Jones and American Equity
Can any of the company-specific risk be diversified away by investing in both Dow Jones and American Equity 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 American Equity 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 American Equity Investment, you can compare the effects of market volatilities on Dow Jones and American Equity 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 American Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and American Equity.
Diversification Opportunities for Dow Jones and American Equity
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and American is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and American Equity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Equity Inve 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 American Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Equity Inve has no effect on the direction of Dow Jones i.e., Dow Jones and American Equity go up and down completely randomly.
Pair Corralation between Dow Jones and American Equity
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.59 times less return on investment than American Equity. In addition to that, Dow Jones is 2.59 times more volatile than American Equity Investment. It trades about 0.11 of its total potential returns per unit of risk. American Equity Investment is currently generating about 0.47 per unit of volatility. If you would invest 5,277 in American Equity Investment on August 28, 2024 and sell it today you would earn a total of 98.00 from holding American Equity Investment or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.24% |
| Values | Daily Returns |
Dow Jones Industrial vs. American Equity Investment
Performance |
| Timeline |
Dow Jones and American Equity Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
American Equity Investment
Pair trading matchups for American Equity
Pair Trading with Dow Jones and American Equity
The main advantage of trading using opposite Dow Jones and American Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, American Equity 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 American Equity will offset losses from the drop in American Equity's long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| American Equity vs. MetLife Preferred Stock | American Equity vs. Prudential Public Limited | American Equity vs. MetLife Preferred Stock | American Equity vs. Jackson Financial |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |