Correlation Between Dow Jones and AFC Gamma
Can any of the company-specific risk be diversified away by investing in both Dow Jones and AFC Gamma 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 AFC Gamma 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 AFC Gamma, you can compare the effects of market volatilities on Dow Jones and AFC Gamma 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 AFC Gamma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and AFC Gamma.
Diversification Opportunities for Dow Jones and AFC Gamma
Very weak diversification
The 3 months correlation between Dow and AFC is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and AFC Gamma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFC Gamma 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 AFC Gamma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFC Gamma has no effect on the direction of Dow Jones i.e., Dow Jones and AFC Gamma go up and down completely randomly.
Pair Corralation between Dow Jones and AFC Gamma
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.36 times more return on investment than AFC Gamma. However, Dow Jones Industrial is 2.78 times less risky than AFC Gamma. It trades about 0.08 of its potential returns per unit of risk. AFC Gamma is currently generating about 0.02 per unit of risk. If you would invest 3,424,593 in Dow Jones Industrial on November 2, 2024 and sell it today you would earn a total of 1,063,620 from holding Dow Jones Industrial or generate 31.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. AFC Gamma
Performance |
| Timeline |
Dow Jones and AFC Gamma Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
AFC Gamma
Pair trading matchups for AFC Gamma
Pair Trading with Dow Jones and AFC Gamma
The main advantage of trading using opposite Dow Jones and AFC Gamma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, AFC Gamma 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 AFC Gamma will offset losses from the drop in AFC Gamma's long position.| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
| AFC Gamma vs. Newlake Capital Partners | AFC Gamma vs. SBA Communications Corp | AFC Gamma vs. Gladstone Land | AFC Gamma vs. Lamar Advertising |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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