Correlation Between Dow Jones and Driehaus Micro
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Driehaus Micro 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 Driehaus Micro 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 Driehaus Micro Cap, you can compare the effects of market volatilities on Dow Jones and Driehaus Micro 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 Driehaus Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Driehaus Micro.
Diversification Opportunities for Dow Jones and Driehaus Micro
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Driehaus is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Driehaus Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Driehaus Micro 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 Driehaus Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Driehaus Micro Cap has no effect on the direction of Dow Jones i.e., Dow Jones and Driehaus Micro go up and down completely randomly.
Pair Corralation between Dow Jones and Driehaus Micro
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.38 times less return on investment than Driehaus Micro. But when comparing it to its historical volatility, Dow Jones Industrial is 2.02 times less risky than Driehaus Micro. It trades about 0.21 of its potential returns per unit of risk. Driehaus Micro Cap is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,399 in Driehaus Micro Cap on August 25, 2024 and sell it today you would earn a total of 153.00 from holding Driehaus Micro Cap or generate 10.94% 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. Driehaus Micro Cap
Performance |
| Timeline |
Dow Jones and Driehaus Micro Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Driehaus Micro Cap
Pair trading matchups for Driehaus Micro
Pair Trading with Dow Jones and Driehaus Micro
The main advantage of trading using opposite Dow Jones and Driehaus Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Driehaus Micro 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 Driehaus Micro will offset losses from the drop in Driehaus Micro's long position.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| Driehaus Micro vs. Driehaus Emerging Markets | Driehaus Micro vs. Driehaus Small Cap | Driehaus Micro vs. Driehaus Emerging Markets | Driehaus Micro vs. Driehaus Emerging Markets |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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