Correlation Between Dow Jones and Salient Select
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Salient Select 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 Salient Select 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 Salient Select Income, you can compare the effects of market volatilities on Dow Jones and Salient Select 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 Salient Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Salient Select.
Diversification Opportunities for Dow Jones and Salient Select
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Salient is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Salient Select Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salient Select Income 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 Salient Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salient Select Income has no effect on the direction of Dow Jones i.e., Dow Jones and Salient Select go up and down completely randomly.
Pair Corralation between Dow Jones and Salient Select
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.26 times more return on investment than Salient Select. However, Dow Jones is 1.26 times more volatile than Salient Select Income. It trades about 0.08 of its potential returns per unit of risk. Salient Select Income is currently generating about 0.08 per unit of risk. If you would invest 3,394,710 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 1,034,941 from holding Dow Jones Industrial or generate 30.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Salient Select Income
Performance |
| Timeline |
Dow Jones and Salient Select Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Salient Select Income
Pair trading matchups for Salient Select
Pair Trading with Dow Jones and Salient Select
The main advantage of trading using opposite Dow Jones and Salient Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Salient Select 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 Salient Select will offset losses from the drop in Salient Select's long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| Salient Select vs. Salient Tactical Plus | Salient Select vs. Salient Tactical Plus | Salient Select vs. Salient Tactical Plus | Salient Select vs. Salient Tactical Plus |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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