Correlation Between Dow Jones and LIBERTY DEFENSE
Can any of the company-specific risk be diversified away by investing in both Dow Jones and LIBERTY DEFENSE 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 LIBERTY DEFENSE 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 LIBERTY DEFENSE H, you can compare the effects of market volatilities on Dow Jones and LIBERTY DEFENSE 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 LIBERTY DEFENSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and LIBERTY DEFENSE.
Diversification Opportunities for Dow Jones and LIBERTY DEFENSE
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and LIBERTY is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and LIBERTY DEFENSE H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIBERTY DEFENSE H 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 LIBERTY DEFENSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIBERTY DEFENSE H has no effect on the direction of Dow Jones i.e., Dow Jones and LIBERTY DEFENSE go up and down completely randomly.
Pair Corralation between Dow Jones and LIBERTY DEFENSE
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the LIBERTY DEFENSE. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 24.81 times less risky than LIBERTY DEFENSE. The index trades about -0.02 of its potential returns per unit of risk. The LIBERTY DEFENSE H is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 30.00 in LIBERTY DEFENSE H on October 15, 2024 and sell it today you would earn a total of 26.00 from holding LIBERTY DEFENSE H or generate 86.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.16% |
| Values | Daily Returns |
Dow Jones Industrial vs. LIBERTY DEFENSE H
Performance |
| Timeline |
Dow Jones and LIBERTY DEFENSE Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
LIBERTY DEFENSE H
Pair trading matchups for LIBERTY DEFENSE
Pair Trading with Dow Jones and LIBERTY DEFENSE
The main advantage of trading using opposite Dow Jones and LIBERTY DEFENSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, LIBERTY DEFENSE 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 LIBERTY DEFENSE will offset losses from the drop in LIBERTY DEFENSE's long position.| Dow Jones vs. LB Foster | Dow Jones vs. Definitive Healthcare Corp | Dow Jones vs. TFI International | Dow Jones vs. Ryanair Holdings PLC |
| LIBERTY DEFENSE vs. ASSA ABLOY AB | LIBERTY DEFENSE vs. Halma plc | LIBERTY DEFENSE vs. Allegion plc | LIBERTY DEFENSE vs. Superior Plus Corp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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