Correlation Between Dow Jones and Ladder Capital
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Ladder Capital 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 Ladder Capital 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 Ladder Capital Corp, you can compare the effects of market volatilities on Dow Jones and Ladder Capital 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 Ladder Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Ladder Capital.
Diversification Opportunities for Dow Jones and Ladder Capital
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Ladder is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Ladder Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ladder Capital Corp 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 Ladder Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ladder Capital Corp has no effect on the direction of Dow Jones i.e., Dow Jones and Ladder Capital go up and down completely randomly.
Pair Corralation between Dow Jones and Ladder Capital
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.85 times more return on investment than Ladder Capital. However, Dow Jones Industrial is 1.17 times less risky than Ladder Capital. It trades about 0.26 of its potential returns per unit of risk. Ladder Capital Corp is currently generating about 0.15 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 234,900 from holding Dow Jones Industrial or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Ladder Capital Corp
Performance |
| Timeline |
Dow Jones and Ladder Capital Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Ladder Capital Corp
Pair trading matchups for Ladder Capital
Pair Trading with Dow Jones and Ladder Capital
The main advantage of trading using opposite Dow Jones and Ladder Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Ladder Capital 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 Ladder Capital will offset losses from the drop in Ladder Capital's long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| Ladder Capital vs. KKR Real Estate | Ladder Capital vs. Ares Commercial Real | Ladder Capital vs. Ellington Residential Mortgage | Ladder Capital vs. Claros Mortgage Trust |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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