Correlation Between Dow Jones and Listed Funds
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Listed Funds 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 Listed Funds 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 Listed Funds Trust, you can compare the effects of market volatilities on Dow Jones and Listed Funds 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 Listed Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Listed Funds.
Diversification Opportunities for Dow Jones and Listed Funds
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Listed is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Listed Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Listed Funds Trust 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 Listed Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Listed Funds Trust has no effect on the direction of Dow Jones i.e., Dow Jones and Listed Funds go up and down completely randomly.
Pair Corralation between Dow Jones and Listed Funds
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.58 times less return on investment than Listed Funds. In addition to that, Dow Jones is 1.34 times more volatile than Listed Funds Trust. It trades about 0.05 of its total potential returns per unit of risk. Listed Funds Trust is currently generating about 0.17 per unit of volatility. If you would invest 3,623 in Listed Funds Trust on September 13, 2024 and sell it today you would earn a total of 53.00 from holding Listed Funds Trust or generate 1.46% 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. Listed Funds Trust
Performance |
| Timeline |
Dow Jones and Listed Funds Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Listed Funds Trust
Pair trading matchups for Listed Funds
Pair Trading with Dow Jones and Listed Funds
The main advantage of trading using opposite Dow Jones and Listed Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Listed Funds 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 Listed Funds will offset losses from the drop in Listed Funds' long position.| Dow Jones vs. ChampionX | Dow Jones vs. Highway Holdings Limited | Dow Jones vs. Westinghouse Air Brake | Dow Jones vs. Cementos Pacasmayo SAA |
| Listed Funds vs. FT Vest Equity | Listed Funds vs. Northern Lights | Listed Funds vs. Dimensional International High | Listed Funds vs. JPMorgan Fundamental Data |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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