Correlation Between Dow Jones and Avantis International
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Avantis International 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 Avantis International 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 Avantis International Small, you can compare the effects of market volatilities on Dow Jones and Avantis International 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 Avantis International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Avantis International.
Diversification Opportunities for Dow Jones and Avantis International
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Avantis is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Avantis International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis International 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 Avantis International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis International has no effect on the direction of Dow Jones i.e., Dow Jones and Avantis International go up and down completely randomly.
Pair Corralation between Dow Jones and Avantis International
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.19 times more return on investment than Avantis International. However, Dow Jones is 1.19 times more volatile than Avantis International Small. It trades about 0.3 of its potential returns per unit of risk. Avantis International Small is currently generating about 0.05 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Avantis International Small
Performance |
| Timeline |
Dow Jones and Avantis International Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Avantis International Small
Pair trading matchups for Avantis International
Pair Trading with Dow Jones and Avantis International
The main advantage of trading using opposite Dow Jones and Avantis International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Avantis International 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 Avantis International will offset losses from the drop in Avantis International's 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 |
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 Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |