Correlation Between Dow Jones and LEGAL GENERAL
Can any of the company-specific risk be diversified away by investing in both Dow Jones and LEGAL GENERAL 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 LEGAL GENERAL 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 LEGAL GENERAL UCITS, you can compare the effects of market volatilities on Dow Jones and LEGAL GENERAL 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 LEGAL GENERAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and LEGAL GENERAL.
Diversification Opportunities for Dow Jones and LEGAL GENERAL
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and LEGAL is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and LEGAL GENERAL UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEGAL GENERAL UCITS 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 LEGAL GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEGAL GENERAL UCITS has no effect on the direction of Dow Jones i.e., Dow Jones and LEGAL GENERAL go up and down completely randomly.
Pair Corralation between Dow Jones and LEGAL GENERAL
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the LEGAL GENERAL. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 1.75 times less risky than LEGAL GENERAL. The index trades about -0.25 of its potential returns per unit of risk. The LEGAL GENERAL UCITS is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 70,340 in LEGAL GENERAL UCITS on November 29, 2024 and sell it today you would earn a total of 140.00 from holding LEGAL GENERAL UCITS or generate 0.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. LEGAL GENERAL UCITS
Performance |
| Timeline |
Dow Jones and LEGAL GENERAL Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
LEGAL GENERAL UCITS
Pair trading matchups for LEGAL GENERAL
Pair Trading with Dow Jones and LEGAL GENERAL
The main advantage of trading using opposite Dow Jones and LEGAL GENERAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, LEGAL GENERAL 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 LEGAL GENERAL will offset losses from the drop in LEGAL GENERAL's long position.| Dow Jones vs. Starbucks | Dow Jones vs. Westinghouse Air Brake | Dow Jones vs. Finnair Oyj | Dow Jones vs. Mesa Air Group |
| LEGAL GENERAL vs. LEGAL GENERAL UCITS | LEGAL GENERAL vs. LEGAL GENERAL UCITS | LEGAL GENERAL vs. LEGAL GENERAL UCITS | LEGAL GENERAL vs. LEGAL GENERAL UCITS |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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