Correlation Between Dow Jones and Beta Shares
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Beta Shares 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 Beta Shares 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 Beta Shares SPASX, you can compare the effects of market volatilities on Dow Jones and Beta Shares 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 Beta Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Beta Shares.
Diversification Opportunities for Dow Jones and Beta Shares
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Beta is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Beta Shares SPASX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beta Shares SPASX 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 Beta Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beta Shares SPASX has no effect on the direction of Dow Jones i.e., Dow Jones and Beta Shares go up and down completely randomly.
Pair Corralation between Dow Jones and Beta Shares
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.51 times less return on investment than Beta Shares. In addition to that, Dow Jones is 1.03 times more volatile than Beta Shares SPASX. It trades about 0.21 of its total potential returns per unit of risk. Beta Shares SPASX is currently generating about 0.32 per unit of volatility. If you would invest 1,604 in Beta Shares SPASX on August 25, 2024 and sell it today you would earn a total of 112.00 from holding Beta Shares SPASX or generate 6.98% 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. Beta Shares SPASX
Performance |
| Timeline |
Dow Jones and Beta Shares Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Beta Shares SPASX
Pair trading matchups for Beta Shares
Pair Trading with Dow Jones and Beta Shares
The main advantage of trading using opposite Dow Jones and Beta Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Beta Shares 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 Beta Shares will offset losses from the drop in Beta Shares' long position.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| Beta Shares vs. Vanguard Total Market | Beta Shares vs. SPDR SP 500 | Beta Shares vs. iShares Core SP | Beta Shares vs. iShares Core SP |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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