Correlation Between Dow Jones and Litman Gregory
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Litman Gregory 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 Litman Gregory 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 Litman Gregory Masters, you can compare the effects of market volatilities on Dow Jones and Litman Gregory 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 Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Litman Gregory.
Diversification Opportunities for Dow Jones and Litman Gregory
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Litman is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Litman Gregory Masters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Masters 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 Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Masters has no effect on the direction of Dow Jones i.e., Dow Jones and Litman Gregory go up and down completely randomly.
Pair Corralation between Dow Jones and Litman Gregory
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 4.7 times more return on investment than Litman Gregory. However, Dow Jones is 4.7 times more volatile than Litman Gregory Masters. It trades about 0.37 of its potential returns per unit of risk. Litman Gregory Masters is currently generating about 0.22 per unit of risk. If you would invest 4,179,460 in Dow Jones Industrial on September 5, 2024 and sell it today you would earn a total of 321,944 from holding Dow Jones Industrial or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Litman Gregory Masters
Performance |
| Timeline |
Dow Jones and Litman Gregory Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Litman Gregory Masters
Pair trading matchups for Litman Gregory
Pair Trading with Dow Jones and Litman Gregory
The main advantage of trading using opposite Dow Jones and Litman Gregory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Litman Gregory 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 Litman Gregory will offset losses from the drop in Litman Gregory's long position.| Dow Jones vs. Shake Shack | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. Dave Busters Entertainment | Dow Jones vs. Meli Hotels International |
| Litman Gregory vs. Pimco Short Asset | Litman Gregory vs. Doubleline Low Duration | Litman Gregory vs. Palmer Square Ssi | Litman Gregory vs. Short Term Income Fund |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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