Correlation Between Dow Jones and Avantis Small
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Avantis Small 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 Small 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 Small Cap, you can compare the effects of market volatilities on Dow Jones and Avantis Small 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 Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Avantis Small.
Diversification Opportunities for Dow Jones and Avantis Small
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Avantis is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Avantis Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Small Cap 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 Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Small Cap has no effect on the direction of Dow Jones i.e., Dow Jones and Avantis Small go up and down completely randomly.
Pair Corralation between Dow Jones and Avantis Small
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.52 times more return on investment than Avantis Small. However, Dow Jones Industrial is 1.92 times less risky than Avantis Small. It trades about 0.15 of its potential returns per unit of risk. Avantis Small Cap is currently generating about 0.07 per unit of risk. If you would invest 3,858,916 in Dow Jones Industrial on September 12, 2024 and sell it today you would earn a total of 565,867 from holding Dow Jones Industrial or generate 14.66% 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. Avantis Small Cap
Performance |
| Timeline |
Dow Jones and Avantis Small Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Avantis Small Cap
Pair trading matchups for Avantis Small
Pair Trading with Dow Jones and Avantis Small
The main advantage of trading using opposite Dow Jones and Avantis Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Avantis Small 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 Small will offset losses from the drop in Avantis Small's long position.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
| Avantis Small vs. Praxis Growth Index | Avantis Small vs. Tfa Alphagen Growth | Avantis Small vs. Qs Defensive Growth | Avantis Small vs. Small Pany Growth |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |