Correlation Between Dow Jones and ProAssurance
Can any of the company-specific risk be diversified away by investing in both Dow Jones and ProAssurance 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 ProAssurance 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 ProAssurance, you can compare the effects of market volatilities on Dow Jones and ProAssurance 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 ProAssurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ProAssurance.
Diversification Opportunities for Dow Jones and ProAssurance
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and ProAssurance is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ProAssurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProAssurance 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 ProAssurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProAssurance has no effect on the direction of Dow Jones i.e., Dow Jones and ProAssurance go up and down completely randomly.
Pair Corralation between Dow Jones and ProAssurance
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.26 times more return on investment than ProAssurance. However, Dow Jones Industrial is 3.78 times less risky than ProAssurance. It trades about 0.08 of its potential returns per unit of risk. ProAssurance is currently generating about -0.01 per unit of risk. If you would invest 3,424,593 in Dow Jones Industrial on November 2, 2024 and sell it today you would earn a total of 1,029,873 from holding Dow Jones Industrial or generate 30.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. ProAssurance
Performance |
| Timeline |
Dow Jones and ProAssurance Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
ProAssurance
Pair trading matchups for ProAssurance
Pair Trading with Dow Jones and ProAssurance
The main advantage of trading using opposite Dow Jones and ProAssurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, ProAssurance 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 ProAssurance will offset losses from the drop in ProAssurance's long position.| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
| ProAssurance vs. Argo Group International | ProAssurance vs. Horace Mann Educators | ProAssurance vs. Kemper | ProAssurance vs. Selective Insurance Group |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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