Correlation Between Dow Jones and TFS FINANCIAL
Can any of the company-specific risk be diversified away by investing in both Dow Jones and TFS FINANCIAL 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 TFS FINANCIAL 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 TFS FINANCIAL, you can compare the effects of market volatilities on Dow Jones and TFS FINANCIAL 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 TFS FINANCIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and TFS FINANCIAL.
Diversification Opportunities for Dow Jones and TFS FINANCIAL
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and TFS is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and TFS FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFS FINANCIAL 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 TFS FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFS FINANCIAL has no effect on the direction of Dow Jones i.e., Dow Jones and TFS FINANCIAL go up and down completely randomly.
Pair Corralation between Dow Jones and TFS FINANCIAL
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.15 times less return on investment than TFS FINANCIAL. But when comparing it to its historical volatility, Dow Jones Industrial is 2.76 times less risky than TFS FINANCIAL. It trades about 0.27 of its potential returns per unit of risk. TFS FINANCIAL is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,200 in TFS FINANCIAL on August 30, 2024 and sell it today you would earn a total of 150.00 from holding TFS FINANCIAL or generate 12.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. TFS FINANCIAL
Performance |
| Timeline |
Dow Jones and TFS FINANCIAL Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
TFS FINANCIAL
Pair trading matchups for TFS FINANCIAL
Pair Trading with Dow Jones and TFS FINANCIAL
The main advantage of trading using opposite Dow Jones and TFS FINANCIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, TFS FINANCIAL 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 TFS FINANCIAL will offset losses from the drop in TFS FINANCIAL's long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| TFS FINANCIAL vs. Apple Inc | TFS FINANCIAL vs. Apple Inc | TFS FINANCIAL vs. Superior Plus Corp | TFS FINANCIAL vs. SIVERS SEMICONDUCTORS AB |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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