Correlation Between Dow Jones and Allianzgi Small-cap
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Allianzgi Small-cap 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 Allianzgi Small-cap 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 Allianzgi Small Cap Blend, you can compare the effects of market volatilities on Dow Jones and Allianzgi Small-cap 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 Allianzgi Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Allianzgi Small-cap.
Diversification Opportunities for Dow Jones and Allianzgi Small-cap
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Allianzgi is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Allianzgi Small Cap Blend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianzgi 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 Allianzgi Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianzgi Small Cap has no effect on the direction of Dow Jones i.e., Dow Jones and Allianzgi Small-cap go up and down completely randomly.
Pair Corralation between Dow Jones and Allianzgi Small-cap
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.24 times less return on investment than Allianzgi Small-cap. But when comparing it to its historical volatility, Dow Jones Industrial is 1.35 times less risky than Allianzgi Small-cap. It trades about 0.2 of its potential returns per unit of risk. Allianzgi Small Cap Blend is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,407 in Allianzgi Small Cap Blend on September 3, 2024 and sell it today you would earn a total of 290.00 from holding Allianzgi Small Cap Blend or generate 12.05% 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. Allianzgi Small Cap Blend
Performance |
| Timeline |
Dow Jones and Allianzgi Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Allianzgi Small Cap Blend
Pair trading matchups for Allianzgi Small-cap
Pair Trading with Dow Jones and Allianzgi Small-cap
The main advantage of trading using opposite Dow Jones and Allianzgi Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Allianzgi Small-cap 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 Allianzgi Small-cap will offset losses from the drop in Allianzgi Small-cap's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| Allianzgi Small-cap vs. Commodities Strategy Fund | Allianzgi Small-cap vs. Shelton Emerging Markets | Allianzgi Small-cap vs. T Rowe Price | Allianzgi Small-cap vs. Black Oak Emerging |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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