Correlation Between Dow Jones and Aberforth Smaller
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Aberforth Smaller 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 Aberforth Smaller 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 Aberforth Smaller Companies, you can compare the effects of market volatilities on Dow Jones and Aberforth Smaller 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 Aberforth Smaller. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Aberforth Smaller.
Diversification Opportunities for Dow Jones and Aberforth Smaller
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dow and Aberforth is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Aberforth Smaller Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberforth Smaller 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 Aberforth Smaller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberforth Smaller has no effect on the direction of Dow Jones i.e., Dow Jones and Aberforth Smaller go up and down completely randomly.
Pair Corralation between Dow Jones and Aberforth Smaller
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.72 times more return on investment than Aberforth Smaller. However, Dow Jones Industrial is 1.38 times less risky than Aberforth Smaller. It trades about 0.08 of its potential returns per unit of risk. Aberforth Smaller Companies is currently generating about 0.01 per unit of risk. If you would invest 3,392,601 in Dow Jones Industrial on October 25, 2024 and sell it today you would earn a total of 1,023,072 from holding Dow Jones Industrial or generate 30.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.4% |
| Values | Daily Returns |
Dow Jones Industrial vs. Aberforth Smaller Companies
Performance |
| Timeline |
Dow Jones and Aberforth Smaller Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Aberforth Smaller Companies
Pair trading matchups for Aberforth Smaller
Pair Trading with Dow Jones and Aberforth Smaller
The main advantage of trading using opposite Dow Jones and Aberforth Smaller positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Aberforth Smaller 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 Aberforth Smaller will offset losses from the drop in Aberforth Smaller's long position.| Dow Jones vs. Xiabuxiabu Catering Management | Dow Jones vs. Neogen | Dow Jones vs. Orion Office Reit | Dow Jones vs. Bassett Furniture Industries |
| Aberforth Smaller vs. Atalaya Mining | Aberforth Smaller vs. Coeur Mining | Aberforth Smaller vs. Thor Mining PLC | Aberforth Smaller vs. Empire Metals Limited |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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