Correlation Between Dow Jones and Focused International
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Focused International 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 Focused International 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 Focused International Growth, you can compare the effects of market volatilities on Dow Jones and Focused International 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 Focused International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Focused International.
Diversification Opportunities for Dow Jones and Focused International
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Focused is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Focused International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focused International 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 Focused International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focused International has no effect on the direction of Dow Jones i.e., Dow Jones and Focused International go up and down completely randomly.
Pair Corralation between Dow Jones and Focused International
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.17 times more return on investment than Focused International. However, Dow Jones is 1.17 times more volatile than Focused International Growth. It trades about 0.25 of its potential returns per unit of risk. Focused International Growth is currently generating about -0.2 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 Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Focused International Growth
Performance |
| Timeline |
Dow Jones and Focused International Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Focused International Growth
Pair trading matchups for Focused International
Pair Trading with Dow Jones and Focused International
The main advantage of trading using opposite Dow Jones and Focused International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Focused International 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 Focused International will offset losses from the drop in Focused International's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Focused International vs. Focused International Growth | Focused International vs. Focused International 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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