Correlation Between Dow Jones and Discipline Fund
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Discipline Fund 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 Discipline Fund 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 Discipline Fund ETF, you can compare the effects of market volatilities on Dow Jones and Discipline Fund 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 Discipline Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Discipline Fund.
Diversification Opportunities for Dow Jones and Discipline Fund
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Discipline is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Discipline Fund ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discipline Fund ETF 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 Discipline Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discipline Fund ETF has no effect on the direction of Dow Jones i.e., Dow Jones and Discipline Fund go up and down completely randomly.
Pair Corralation between Dow Jones and Discipline Fund
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.28 times less return on investment than Discipline Fund. In addition to that, Dow Jones is 1.84 times more volatile than Discipline Fund ETF. It trades about 0.05 of its total potential returns per unit of risk. Discipline Fund ETF is currently generating about 0.21 per unit of volatility. If you would invest 2,279 in Discipline Fund ETF on September 13, 2024 and sell it today you would earn a total of 31.00 from holding Discipline Fund ETF or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Discipline Fund ETF
Performance |
| Timeline |
Dow Jones and Discipline Fund Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Discipline Fund ETF
Pair trading matchups for Discipline Fund
Pair Trading with Dow Jones and Discipline Fund
The main advantage of trading using opposite Dow Jones and Discipline Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Discipline Fund 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 Discipline Fund will offset losses from the drop in Discipline Fund's long position.| Dow Jones vs. ChampionX | Dow Jones vs. Highway Holdings Limited | Dow Jones vs. Westinghouse Air Brake | Dow Jones vs. Cementos Pacasmayo SAA |
| Discipline Fund vs. ATAC Rotation ETF | Discipline Fund vs. Amplify BlackSwan ISWN | Discipline Fund vs. Tidal ETF Trust | Discipline Fund vs. Aptus Defined Risk |
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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