Correlation Between Dow Jones and Aggressive Investors
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Aggressive Investors 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 Aggressive Investors 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 Aggressive Investors 1, you can compare the effects of market volatilities on Dow Jones and Aggressive Investors 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 Aggressive Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Aggressive Investors.
Diversification Opportunities for Dow Jones and Aggressive Investors
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Aggressive is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Aggressive Investors 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Investors 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 Aggressive Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Investors has no effect on the direction of Dow Jones i.e., Dow Jones and Aggressive Investors go up and down completely randomly.
Pair Corralation between Dow Jones and Aggressive Investors
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.69 times less return on investment than Aggressive Investors. But when comparing it to its historical volatility, Dow Jones Industrial is 1.13 times less risky than Aggressive Investors. It trades about 0.26 of its potential returns per unit of risk. Aggressive Investors 1 is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 9,505 in Aggressive Investors 1 on August 29, 2024 and sell it today you would earn a total of 916.00 from holding Aggressive Investors 1 or generate 9.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Dow Jones Industrial vs. Aggressive Investors 1
Performance |
| Timeline |
Dow Jones and Aggressive Investors Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Aggressive Investors 1
Pair trading matchups for Aggressive Investors
Pair Trading with Dow Jones and Aggressive Investors
The main advantage of trading using opposite Dow Jones and Aggressive Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Aggressive Investors 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 Aggressive Investors will offset losses from the drop in Aggressive Investors' long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Aggressive Investors vs. First Trust Specialty | Aggressive Investors vs. Vanguard Financials Index | Aggressive Investors vs. Financials Ultrasector Profund | Aggressive Investors vs. Goldman Sachs Trust |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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