Correlation Between Dow Jones and Aberdeen Emerging
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Aberdeen Emerging 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 Aberdeen Emerging 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 Aberdeen Emerging Markets, you can compare the effects of market volatilities on Dow Jones and Aberdeen Emerging 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 Aberdeen Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Aberdeen Emerging.
Diversification Opportunities for Dow Jones and Aberdeen Emerging
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Aberdeen is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Aberdeen Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Emerging Markets 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 Aberdeen Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Emerging Markets has no effect on the direction of Dow Jones i.e., Dow Jones and Aberdeen Emerging go up and down completely randomly.
Pair Corralation between Dow Jones and Aberdeen Emerging
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.09 times more return on investment than Aberdeen Emerging. However, Dow Jones is 1.09 times more volatile than Aberdeen Emerging Markets. It trades about 0.25 of its potential returns per unit of risk. Aberdeen Emerging Markets is currently generating about -0.2 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 233,449 from holding Dow Jones Industrial or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Aberdeen Emerging Markets
Performance |
| Timeline |
Dow Jones and Aberdeen Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Aberdeen Emerging Markets
Pair trading matchups for Aberdeen Emerging
Pair Trading with Dow Jones and Aberdeen Emerging
The main advantage of trading using opposite Dow Jones and Aberdeen Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Aberdeen Emerging 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 Aberdeen Emerging will offset losses from the drop in Aberdeen Emerging's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Aberdeen Emerging vs. T Rowe Price | Aberdeen Emerging vs. Pace Large Growth | Aberdeen Emerging vs. Upright Assets Allocation | Aberdeen Emerging vs. Dodge Cox Stock |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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