Correlation Between Dow Jones and Arch Capital
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Arch Capital 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 Arch Capital 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 Arch Capital Group, you can compare the effects of market volatilities on Dow Jones and Arch Capital 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 Arch Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Arch Capital.
Diversification Opportunities for Dow Jones and Arch Capital
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Arch is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Arch Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Capital Group 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 Arch Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Capital Group has no effect on the direction of Dow Jones i.e., Dow Jones and Arch Capital go up and down completely randomly.
Pair Corralation between Dow Jones and Arch Capital
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.14 times less return on investment than Arch Capital. But when comparing it to its historical volatility, Dow Jones Industrial is 2.36 times less risky than Arch Capital. It trades about 0.08 of its potential returns per unit of risk. Arch Capital Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,395 in Arch Capital Group on August 29, 2024 and sell it today you would earn a total of 4,111 from holding Arch Capital Group or generate 76.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.22% |
| Values | Daily Returns |
Dow Jones Industrial vs. Arch Capital Group
Performance |
| Timeline |
Dow Jones and Arch Capital Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Arch Capital Group
Pair trading matchups for Arch Capital
Pair Trading with Dow Jones and Arch Capital
The main advantage of trading using opposite Dow Jones and Arch Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Arch Capital 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 Arch Capital will offset losses from the drop in Arch Capital's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Arch Capital vs. Park Hotels Resorts | Arch Capital vs. Consolidated Communications Holdings | Arch Capital vs. Pebblebrook Hotel Trust | Arch Capital vs. NH HOTEL 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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