Correlation Between Dow Jones and Alight
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Alight 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 Alight 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 Alight Inc, you can compare the effects of market volatilities on Dow Jones and Alight 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 Alight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Alight.
Diversification Opportunities for Dow Jones and Alight
Almost no diversification
The 3 months correlation between Dow and Alight is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Alight Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alight Inc 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 Alight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alight Inc has no effect on the direction of Dow Jones i.e., Dow Jones and Alight go up and down completely randomly.
Pair Corralation between Dow Jones and Alight
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.51 times more return on investment than Alight. However, Dow Jones Industrial is 1.97 times less risky than Alight. It trades about -0.05 of its potential returns per unit of risk. Alight Inc is currently generating about -0.17 per unit of risk. If you would invest 4,148,819 in Dow Jones Industrial on January 13, 2025 and sell it today you would lose (127,548) from holding Dow Jones Industrial or give up 3.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Alight Inc
Performance |
| Timeline |
Dow Jones and Alight Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Alight Inc
Pair trading matchups for Alight
Pair Trading with Dow Jones and Alight
The main advantage of trading using opposite Dow Jones and Alight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Alight 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 Alight will offset losses from the drop in Alight's long position.| Dow Jones vs. Presidio Property Trust | Dow Jones vs. AG Mortgage Investment | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. NorthWestern |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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