Correlation Between Dow Jones and Old Second
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Old Second 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 Old Second 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 Old Second Bancorp, you can compare the effects of market volatilities on Dow Jones and Old Second 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 Old Second. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Old Second.
Diversification Opportunities for Dow Jones and Old Second
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Old is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Old Second Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Second Bancorp 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 Old Second. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Second Bancorp has no effect on the direction of Dow Jones i.e., Dow Jones and Old Second go up and down completely randomly.
Pair Corralation between Dow Jones and Old Second
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.36 times less return on investment than Old Second. But when comparing it to its historical volatility, Dow Jones Industrial is 2.82 times less risky than Old Second. It trades about 0.17 of its potential returns per unit of risk. Old Second Bancorp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,692 in Old Second Bancorp on August 29, 2024 and sell it today you would earn a total of 177.00 from holding Old Second Bancorp or generate 10.46% 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. Old Second Bancorp
Performance |
| Timeline |
Dow Jones and Old Second Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Old Second Bancorp
Pair trading matchups for Old Second
Pair Trading with Dow Jones and Old Second
The main advantage of trading using opposite Dow Jones and Old Second positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Old Second 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 Old Second will offset losses from the drop in Old Second's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Old Second vs. Ohio Valley Banc | Old Second vs. Peoples Bancorp | Old Second vs. OceanFirst Financial Corp | Old Second vs. QCR Holdings |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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