Correlation Between Dow Jones and AvalonBay Communities
Can any of the company-specific risk be diversified away by investing in both Dow Jones and AvalonBay Communities 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 AvalonBay Communities 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 AvalonBay Communities, you can compare the effects of market volatilities on Dow Jones and AvalonBay Communities 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 AvalonBay Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and AvalonBay Communities.
Diversification Opportunities for Dow Jones and AvalonBay Communities
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and AvalonBay is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and AvalonBay Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AvalonBay Communities 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 AvalonBay Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AvalonBay Communities has no effect on the direction of Dow Jones i.e., Dow Jones and AvalonBay Communities go up and down completely randomly.
Pair Corralation between Dow Jones and AvalonBay Communities
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.63 times more return on investment than AvalonBay Communities. However, Dow Jones Industrial is 1.58 times less risky than AvalonBay Communities. It trades about 0.3 of its potential returns per unit of risk. AvalonBay Communities is currently generating about 0.1 per unit of risk. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 276,911 from holding Dow Jones Industrial or generate 6.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. AvalonBay Communities
Performance |
| Timeline |
Dow Jones and AvalonBay Communities Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
AvalonBay Communities
Pair trading matchups for AvalonBay Communities
Pair Trading with Dow Jones and AvalonBay Communities
The main advantage of trading using opposite Dow Jones and AvalonBay Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, AvalonBay Communities 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 AvalonBay Communities will offset losses from the drop in AvalonBay Communities' long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| AvalonBay Communities vs. Apartment Investment and | AvalonBay Communities vs. Clipper Realty | AvalonBay Communities vs. BRT Realty Trust | AvalonBay Communities vs. UDR Inc |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |