Correlation Between Dow Jones and Pax Small
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Pax Small 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 Pax Small 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 Pax Small Cap, you can compare the effects of market volatilities on Dow Jones and Pax Small 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 Pax Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Pax Small.
Diversification Opportunities for Dow Jones and Pax Small
Almost no diversification
The 3 months correlation between Dow and Pax is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Pax Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Small Cap 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 Pax Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Small Cap has no effect on the direction of Dow Jones i.e., Dow Jones and Pax Small go up and down completely randomly.
Pair Corralation between Dow Jones and Pax Small
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.23 times less return on investment than Pax Small. But when comparing it to its historical volatility, Dow Jones Industrial is 1.4 times less risky than Pax Small. It trades about 0.37 of its potential returns per unit of risk. Pax Small Cap is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,774 in Pax Small Cap on September 1, 2024 and sell it today you would earn a total of 172.00 from holding Pax Small Cap or generate 9.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Pax Small Cap
Performance |
| Timeline |
Dow Jones and Pax Small Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pax Small Cap
Pair trading matchups for Pax Small
Pair Trading with Dow Jones and Pax Small
The main advantage of trading using opposite Dow Jones and Pax Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Pax Small 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 Pax Small will offset losses from the drop in Pax Small's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Pax Small vs. Pgim Jennison Diversified | Pax Small vs. Lord Abbett Diversified | Pax Small vs. The Gabelli Small | Pax Small vs. Tax Managed Mid Small |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |