Correlation Between Dow Jones and Alm Brand
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Alm Brand 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 Alm Brand 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 Alm Brand, you can compare the effects of market volatilities on Dow Jones and Alm Brand 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 Alm Brand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Alm Brand.
Diversification Opportunities for Dow Jones and Alm Brand
Poor diversification
The 3 months correlation between Dow and Alm is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Alm Brand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alm Brand 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 Alm Brand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alm Brand has no effect on the direction of Dow Jones i.e., Dow Jones and Alm Brand go up and down completely randomly.
Pair Corralation between Dow Jones and Alm Brand
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.51 times more return on investment than Alm Brand. However, Dow Jones Industrial is 1.96 times less risky than Alm Brand. It trades about 0.13 of its potential returns per unit of risk. Alm Brand is currently generating about 0.05 per unit of risk. If you would invest 3,620,444 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 865,587 from holding Dow Jones Industrial or generate 23.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Dow Jones Industrial vs. Alm Brand
Performance |
| Timeline |
Dow Jones and Alm Brand Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Alm Brand
Pair trading matchups for Alm Brand
Pair Trading with Dow Jones and Alm Brand
The main advantage of trading using opposite Dow Jones and Alm Brand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Alm Brand 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 Alm Brand will offset losses from the drop in Alm Brand's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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