Correlation Between Dow Jones and Us Lg
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Us Lg 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 Us Lg 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 Us Lg Cap, you can compare the effects of market volatilities on Dow Jones and Us Lg 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 Us Lg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Us Lg.
Diversification Opportunities for Dow Jones and Us Lg
Almost no diversification
The 3 months correlation between Dow and DUSQX is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Us Lg Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Lg 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 Us Lg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Lg Cap has no effect on the direction of Dow Jones i.e., Dow Jones and Us Lg go up and down completely randomly.
Pair Corralation between Dow Jones and Us Lg
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.24 times more return on investment than Us Lg. However, Dow Jones is 1.24 times more volatile than Us Lg Cap. It trades about 0.34 of its potential returns per unit of risk. Us Lg Cap is currently generating about 0.36 per unit of risk. If you would invest 4,205,219 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 285,846 from holding Dow Jones Industrial or generate 6.8% 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. Us Lg Cap
Performance |
| Timeline |
Dow Jones and Us Lg Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Us Lg Cap
Pair trading matchups for Us Lg
Pair Trading with Dow Jones and Us Lg
The main advantage of trading using opposite Dow Jones and Us Lg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Us Lg 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 Us Lg will offset losses from the drop in Us Lg's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| Us Lg vs. Us Micro Cap | Us Lg vs. Dfa Short Term Government | Us Lg vs. Emerging Markets Small | Us Lg vs. Dfa One Year Fixed |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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