Correlation Between Dow Jones and Dfa -
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Dfa - 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 Dfa - 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 Dfa Small, you can compare the effects of market volatilities on Dow Jones and Dfa - 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 Dfa -. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Dfa -.
Diversification Opportunities for Dow Jones and Dfa -
Almost no diversification
The 3 months correlation between Dow and Dfa is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Dfa Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Small 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 Dfa -. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Small has no effect on the direction of Dow Jones i.e., Dow Jones and Dfa - go up and down completely randomly.
Pair Corralation between Dow Jones and Dfa -
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.57 times less return on investment than Dfa -. But when comparing it to its historical volatility, Dow Jones Industrial is 1.42 times less risky than Dfa -. It trades about 0.24 of its potential returns per unit of risk. Dfa Small is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 2,858 in Dfa Small on August 26, 2024 and sell it today you would earn a total of 234.00 from holding Dfa Small or generate 8.19% 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. Dfa Small
Performance |
| Timeline |
Dow Jones and Dfa - Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Dfa Small
Pair trading matchups for Dfa -
Pair Trading with Dow Jones and Dfa -
The main advantage of trading using opposite Dow Jones and Dfa - positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Dfa - 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 Dfa - will offset losses from the drop in Dfa -'s long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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