Correlation Between Dow Jones and Hilltop Holdings
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Hilltop Holdings 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 Hilltop Holdings 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 Hilltop Holdings, you can compare the effects of market volatilities on Dow Jones and Hilltop Holdings 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 Hilltop Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Hilltop Holdings.
Diversification Opportunities for Dow Jones and Hilltop Holdings
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Hilltop is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Hilltop Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilltop Holdings 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 Hilltop Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilltop Holdings has no effect on the direction of Dow Jones i.e., Dow Jones and Hilltop Holdings go up and down completely randomly.
Pair Corralation between Dow Jones and Hilltop Holdings
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.35 times more return on investment than Hilltop Holdings. However, Dow Jones Industrial is 2.84 times less risky than Hilltop Holdings. It trades about 0.27 of its potential returns per unit of risk. Hilltop Holdings is currently generating about 0.06 per unit of risk. If you would invest 4,223,305 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 248,901 from holding Dow Jones Industrial or generate 5.89% 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. Hilltop Holdings
Performance |
| Timeline |
Dow Jones and Hilltop Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Hilltop Holdings
Pair trading matchups for Hilltop Holdings
Pair Trading with Dow Jones and Hilltop Holdings
The main advantage of trading using opposite Dow Jones and Hilltop Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Hilltop Holdings 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 Hilltop Holdings will offset losses from the drop in Hilltop Holdings' long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| Hilltop Holdings vs. SVB T Corp | Hilltop Holdings vs. First Capital | Hilltop Holdings vs. Pioneer Bankcorp | Hilltop Holdings vs. Liberty Northwest Bancorp |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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