Correlation Between Dow Jones and RenaissanceRe Holdings
Can any of the company-specific risk be diversified away by investing in both Dow Jones and RenaissanceRe Holdings 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 RenaissanceRe Holdings 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 RenaissanceRe Holdings, you can compare the effects of market volatilities on Dow Jones and RenaissanceRe Holdings 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 RenaissanceRe Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and RenaissanceRe Holdings.
Diversification Opportunities for Dow Jones and RenaissanceRe Holdings
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and RenaissanceRe is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and RenaissanceRe Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RenaissanceRe Holdings 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 RenaissanceRe Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RenaissanceRe Holdings has no effect on the direction of Dow Jones i.e., Dow Jones and RenaissanceRe Holdings go up and down completely randomly.
Pair Corralation between Dow Jones and RenaissanceRe Holdings
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.38 times more return on investment than RenaissanceRe Holdings. However, Dow Jones Industrial is 2.62 times less risky than RenaissanceRe Holdings. It trades about -0.21 of its potential returns per unit of risk. RenaissanceRe Holdings is currently generating about -0.1 per unit of risk. If you would invest 4,414,856 in Dow Jones Industrial on October 12, 2024 and sell it today you would lose (151,336) from holding Dow Jones Industrial or give up 3.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 80.95% |
| Values | Daily Returns |
Dow Jones Industrial vs. RenaissanceRe Holdings
Performance |
| Timeline |
Dow Jones and RenaissanceRe Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
RenaissanceRe Holdings
Pair trading matchups for RenaissanceRe Holdings
Pair Trading with Dow Jones and RenaissanceRe Holdings
The main advantage of trading using opposite Dow Jones and RenaissanceRe Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, RenaissanceRe Holdings 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 RenaissanceRe Holdings will offset losses from the drop in RenaissanceRe Holdings' long position.| Dow Jones vs. Lululemon Athletica | Dow Jones vs. Vistra Energy Corp | Dow Jones vs. The Gap, | Dow Jones vs. Pool Corporation |
| RenaissanceRe Holdings vs. ON SEMICONDUCTOR | RenaissanceRe Holdings vs. InterContinental Hotels Group | RenaissanceRe Holdings vs. ELMOS SEMICONDUCTOR | RenaissanceRe Holdings vs. NXP Semiconductors NV |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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