Correlation Between Dow Jones and LHA Market
Can any of the company-specific risk be diversified away by investing in both Dow Jones and LHA Market 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 LHA Market 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 LHA Market State, you can compare the effects of market volatilities on Dow Jones and LHA Market 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 LHA Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and LHA Market.
Diversification Opportunities for Dow Jones and LHA Market
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and LHA is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and LHA Market State in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LHA Market State 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 LHA Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LHA Market State has no effect on the direction of Dow Jones i.e., Dow Jones and LHA Market go up and down completely randomly.
Pair Corralation between Dow Jones and LHA Market
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.69 times more return on investment than LHA Market. However, Dow Jones is 1.69 times more volatile than LHA Market State. It trades about 0.24 of its potential returns per unit of risk. LHA Market State is currently generating about -0.05 per unit of risk. If you would invest 4,211,440 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 218,211 from holding Dow Jones Industrial or generate 5.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. LHA Market State
Performance |
| Timeline |
Dow Jones and LHA Market Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
LHA Market State
Pair trading matchups for LHA Market
Pair Trading with Dow Jones and LHA Market
The main advantage of trading using opposite Dow Jones and LHA Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, LHA Market 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 LHA Market will offset losses from the drop in LHA Market's long position.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| LHA Market vs. ETF Series Solutions | LHA Market vs. Northern Lights | LHA Market vs. Innovator Nasdaq 100 Power | LHA Market vs. Tidal ETF 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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