Correlation Between Dow Jones and Locorr Hedged
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Locorr Hedged 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 Locorr Hedged 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 Locorr Hedged Core, you can compare the effects of market volatilities on Dow Jones and Locorr Hedged 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 Locorr Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Locorr Hedged.
Diversification Opportunities for Dow Jones and Locorr Hedged
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Locorr is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Locorr Hedged Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locorr Hedged Core 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 Locorr Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locorr Hedged Core has no effect on the direction of Dow Jones i.e., Dow Jones and Locorr Hedged go up and down completely randomly.
Pair Corralation between Dow Jones and Locorr Hedged
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 4.28 times more return on investment than Locorr Hedged. However, Dow Jones is 4.28 times more volatile than Locorr Hedged Core. It trades about 0.26 of its potential returns per unit of risk. Locorr Hedged Core is currently generating about 0.04 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% 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. Locorr Hedged Core
Performance |
| Timeline |
Dow Jones and Locorr Hedged Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Locorr Hedged Core
Pair trading matchups for Locorr Hedged
Pair Trading with Dow Jones and Locorr Hedged
The main advantage of trading using opposite Dow Jones and Locorr Hedged positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Locorr Hedged 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 Locorr Hedged will offset losses from the drop in Locorr Hedged's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Locorr Hedged vs. Midcap Value Fund | Locorr Hedged vs. Tiaa Cref Large Cap Value | Locorr Hedged vs. Steward Small Mid Cap | Locorr Hedged vs. Kinetics Market Opportunities |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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