Correlation Between Dow Jones and FIRST TRUST
Can any of the company-specific risk be diversified away by investing in both Dow Jones and FIRST TRUST 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 FIRST TRUST 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 FIRST TRUST GLOBAL, you can compare the effects of market volatilities on Dow Jones and FIRST TRUST 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 FIRST TRUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and FIRST TRUST.
Diversification Opportunities for Dow Jones and FIRST TRUST
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and FIRST is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and FIRST TRUST GLOBAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST TRUST GLOBAL 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 FIRST TRUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST TRUST GLOBAL has no effect on the direction of Dow Jones i.e., Dow Jones and FIRST TRUST go up and down completely randomly.
Pair Corralation between Dow Jones and FIRST TRUST
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.68 times more return on investment than FIRST TRUST. However, Dow Jones is 1.68 times more volatile than FIRST TRUST GLOBAL. It trades about 0.07 of its potential returns per unit of risk. FIRST TRUST GLOBAL is currently generating about 0.11 per unit of risk. If you would invest 3,754,533 in Dow Jones Industrial on September 20, 2024 and sell it today you would earn a total of 478,154 from holding Dow Jones Industrial or generate 12.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 85.89% |
| Values | Daily Returns |
Dow Jones Industrial vs. FIRST TRUST GLOBAL
Performance |
| Timeline |
Dow Jones and FIRST TRUST Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
FIRST TRUST GLOBAL
Pair trading matchups for FIRST TRUST
Pair Trading with Dow Jones and FIRST TRUST
The main advantage of trading using opposite Dow Jones and FIRST TRUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, FIRST TRUST 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 FIRST TRUST will offset losses from the drop in FIRST TRUST's long position.| Dow Jones vs. Digi International | Dow Jones vs. Grupo Televisa SAB | Dow Jones vs. United Microelectronics | Dow Jones vs. Weibo Corp |
| FIRST TRUST vs. Edinburgh Worldwide Investment | FIRST TRUST vs. BlackRock Latin American | FIRST TRUST vs. Coor Service Management | FIRST TRUST vs. Franklin FTSE Brazil |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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