Correlation Between Dow Jones and Great West
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Great West 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 Great West 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 Great West Lifeco, you can compare the effects of market volatilities on Dow Jones and Great West 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 Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Great West.
Diversification Opportunities for Dow Jones and Great West
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Great is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Lifeco has no effect on the direction of Dow Jones i.e., Dow Jones and Great West go up and down completely randomly.
Pair Corralation between Dow Jones and Great West
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.96 times more return on investment than Great West. However, Dow Jones Industrial is 1.04 times less risky than Great West. It trades about 0.12 of its potential returns per unit of risk. Great West Lifeco is currently generating about 0.07 per unit of risk. If you would invest 3,387,678 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 1,103,387 from holding Dow Jones Industrial or generate 32.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Great West Lifeco
Performance |
| Timeline |
Dow Jones and Great West Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Great West Lifeco
Pair trading matchups for Great West
Pair Trading with Dow Jones and Great West
The main advantage of trading using opposite Dow Jones and Great West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Great West 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 Great West will offset losses from the drop in Great West's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Great West vs. Richelieu Hardware | Great West vs. Cogeco Communications | Great West vs. Quisitive Technology Solutions | Great West vs. Rogers Communications |
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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