Correlation Between Dow Jones and The Disciplined
Can any of the company-specific risk be diversified away by investing in both Dow Jones and The Disciplined 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 The Disciplined 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 The Disciplined Growth, you can compare the effects of market volatilities on Dow Jones and The Disciplined 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 The Disciplined. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and The Disciplined.
Diversification Opportunities for Dow Jones and The Disciplined
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and The is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and The Disciplined Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Disciplined Growth 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 The Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Disciplined Growth has no effect on the direction of Dow Jones i.e., Dow Jones and The Disciplined go up and down completely randomly.
Pair Corralation between Dow Jones and The Disciplined
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.67 times more return on investment than The Disciplined. However, Dow Jones Industrial is 1.49 times less risky than The Disciplined. It trades about -0.16 of its potential returns per unit of risk. The Disciplined Growth is currently generating about -0.26 per unit of risk. If you would invest 4,488,213 in Dow Jones Industrial on December 1, 2024 and sell it today you would lose (104,122) from holding Dow Jones Industrial or give up 2.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. The Disciplined Growth
Performance |
| Timeline |
Dow Jones and The Disciplined Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
The Disciplined Growth
Pair trading matchups for The Disciplined
Pair Trading with Dow Jones and The Disciplined
The main advantage of trading using opposite Dow Jones and The Disciplined positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, The Disciplined 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 The Disciplined will offset losses from the drop in The Disciplined's long position.| Dow Jones vs. Cannae Holdings | Dow Jones vs. Fidus Investment Corp | Dow Jones vs. SEI Investments | Dow Jones vs. Cracker Barrel Old |
| The Disciplined vs. Fidelity Advisor Large | The Disciplined vs. 13d Activist Fund | The Disciplined vs. 13d Activist Fund | The Disciplined vs. 13d Activist Fund |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |