Correlation Between Dow Jones and Guggenheim Alpha
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Guggenheim Alpha 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 Guggenheim Alpha 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 Guggenheim Alpha Opportunity, you can compare the effects of market volatilities on Dow Jones and Guggenheim Alpha 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 Guggenheim Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Guggenheim Alpha.
Diversification Opportunities for Dow Jones and Guggenheim Alpha
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Guggenheim is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Guggenheim Alpha Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Alpha Opp 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 Guggenheim Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Alpha Opp has no effect on the direction of Dow Jones i.e., Dow Jones and Guggenheim Alpha go up and down completely randomly.
Pair Corralation between Dow Jones and Guggenheim Alpha
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.67 times more return on investment than Guggenheim Alpha. However, Dow Jones is 1.67 times more volatile than Guggenheim Alpha Opportunity. It trades about 0.34 of its potential returns per unit of risk. Guggenheim Alpha Opportunity is currently generating about 0.19 per unit of risk. If you would invest 4,205,219 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 285,846 from holding Dow Jones Industrial or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Guggenheim Alpha Opportunity
Performance |
| Timeline |
Dow Jones and Guggenheim Alpha Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Guggenheim Alpha Opportunity
Pair trading matchups for Guggenheim Alpha
Pair Trading with Dow Jones and Guggenheim Alpha
The main advantage of trading using opposite Dow Jones and Guggenheim Alpha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Guggenheim Alpha 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 Guggenheim Alpha will offset losses from the drop in Guggenheim Alpha's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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