Correlation Between Dow Jones and First Investors
Can any of the company-specific risk be diversified away by investing in both Dow Jones and First Investors 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 Investors 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 Investors Select, you can compare the effects of market volatilities on Dow Jones and First Investors 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 Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and First Investors.
Diversification Opportunities for Dow Jones and First Investors
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and First Investors Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Investors Select 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 Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Investors Select has no effect on the direction of Dow Jones i.e., Dow Jones and First Investors go up and down completely randomly.
Pair Corralation between Dow Jones and First Investors
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.09 times less return on investment than First Investors. But when comparing it to its historical volatility, Dow Jones Industrial is 1.18 times less risky than First Investors. It trades about 0.11 of its potential returns per unit of risk. First Investors Select is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,169 in First Investors Select on September 1, 2024 and sell it today you would earn a total of 209.00 from holding First Investors Select or generate 17.88% 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. First Investors Select
Performance |
| Timeline |
Dow Jones and First Investors Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
First Investors Select
Pair trading matchups for First Investors
Pair Trading with Dow Jones and First Investors
The main advantage of trading using opposite Dow Jones and First Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, First Investors 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 Investors will offset losses from the drop in First Investors' long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| First Investors vs. Old Westbury Large | First Investors vs. Qs Large Cap | First Investors vs. Morningstar Unconstrained Allocation | First Investors vs. Principal Lifetime Hybrid |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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