Correlation Between Dow Jones and American Mutual
Can any of the company-specific risk be diversified away by investing in both Dow Jones and American Mutual 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 Mutual 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 Mutual Fund, you can compare the effects of market volatilities on Dow Jones and American Mutual 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 Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and American Mutual.
Diversification Opportunities for Dow Jones and American Mutual
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and American is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual 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 Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Mutual has no effect on the direction of Dow Jones i.e., Dow Jones and American Mutual go up and down completely randomly.
Pair Corralation between Dow Jones and American Mutual
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.52 times more return on investment than American Mutual. However, Dow Jones is 1.52 times more volatile than American Mutual Fund. It trades about 0.27 of its potential returns per unit of risk. American Mutual Fund is currently generating about 0.15 per unit of risk. If you would invest 4,223,305 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 248,901 from holding Dow Jones Industrial or generate 5.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. American Mutual Fund
Performance |
| Timeline |
Dow Jones and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
American Mutual Fund
Pair trading matchups for American Mutual
Pair Trading with Dow Jones and American Mutual
The main advantage of trading using opposite Dow Jones and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, American Mutual 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 Mutual will offset losses from the drop in American Mutual's long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| American Mutual vs. Us Global Investors | American Mutual vs. Barings Global Floating | American Mutual vs. Dodge Global Stock | American Mutual vs. Ab Global Bond |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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