Correlation Between Dow Jones and James Alpha
Can any of the company-specific risk be diversified away by investing in both Dow Jones and James Alpha 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 James Alpha 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 James Alpha Global, you can compare the effects of market volatilities on Dow Jones and James Alpha 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 James Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and James Alpha.
Diversification Opportunities for Dow Jones and James Alpha
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and James is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and James Alpha Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Alpha Global 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 James Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Alpha Global has no effect on the direction of Dow Jones i.e., Dow Jones and James Alpha go up and down completely randomly.
Pair Corralation between Dow Jones and James Alpha
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.01 times more return on investment than James Alpha. However, Dow Jones is 1.01 times more volatile than James Alpha Global. It trades about 0.16 of its potential returns per unit of risk. James Alpha Global is currently generating about 0.08 per unit of risk. If you would invest 3,857,103 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 615,103 from holding Dow Jones Industrial or generate 15.95% 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. James Alpha Global
Performance |
| Timeline |
Dow Jones and James Alpha Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
James Alpha Global
Pair trading matchups for James Alpha
Pair Trading with Dow Jones and James Alpha
The main advantage of trading using opposite Dow Jones and James Alpha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, James Alpha 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 James Alpha will offset losses from the drop in James Alpha's long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| James Alpha vs. James Alpha Global | James Alpha vs. James Alpha Global | James Alpha vs. Virtus Global Real | James Alpha vs. Virtus Global Real |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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