Correlation Between Dow Jones and Old Westbury
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Old Westbury 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 Westbury 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 Westbury Credit, you can compare the effects of market volatilities on Dow Jones and Old Westbury 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 Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Old Westbury.
Diversification Opportunities for Dow Jones and Old Westbury
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Old is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Old Westbury Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Credit 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 Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Credit has no effect on the direction of Dow Jones i.e., Dow Jones and Old Westbury go up and down completely randomly.
Pair Corralation between Dow Jones and Old Westbury
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.94 times more return on investment than Old Westbury. However, Dow Jones is 1.94 times more volatile than Old Westbury Credit. It trades about 0.1 of its potential returns per unit of risk. Old Westbury Credit is currently generating about 0.06 per unit of risk. If you would invest 3,736,112 in Dow Jones Industrial on November 9, 2024 and sell it today you would earn a total of 738,651 from holding Dow Jones Industrial or generate 19.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Dow Jones Industrial vs. Old Westbury Credit
Performance |
| Timeline |
Dow Jones and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Old Westbury Credit
Pair trading matchups for Old Westbury
Pair Trading with Dow Jones and Old Westbury
The main advantage of trading using opposite Dow Jones and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Old Westbury 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 Westbury will offset losses from the drop in Old Westbury's long position.| Dow Jones vs. Douglas Emmett | Dow Jones vs. Todos Medical | Dow Jones vs. Eastern Co | Dow Jones vs. Merit Medical Systems |
| Old Westbury vs. World Precious Minerals | Old Westbury vs. Europac Gold Fund | Old Westbury vs. Franklin Gold Precious | Old Westbury vs. Great West Goldman Sachs |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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