Correlation Between Dow Jones and Ab Small
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Ab 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 Ab 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 Ab Small Cap, you can compare the effects of market volatilities on Dow Jones and Ab 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 Ab Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Ab Small.
Diversification Opportunities for Dow Jones and Ab Small
Very poor diversification
The 3 months correlation between Dow and SCCVX is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab 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 Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Dow Jones i.e., Dow Jones and Ab Small go up and down completely randomly.
Pair Corralation between Dow Jones and Ab Small
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.4 times less return on investment than Ab Small. But when comparing it to its historical volatility, Dow Jones Industrial is 1.62 times less risky than Ab Small. It trades about 0.16 of its potential returns per unit of risk. Ab Small Cap is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,398 in Ab Small Cap on August 28, 2024 and sell it today you would earn a total of 111.00 from holding Ab Small Cap or generate 7.94% 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. Ab Small Cap
Performance |
| Timeline |
Dow Jones and Ab Small Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Ab Small Cap
Pair trading matchups for Ab Small
Pair Trading with Dow Jones and Ab Small
The main advantage of trading using opposite Dow Jones and Ab Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Ab 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 Ab Small will offset losses from the drop in Ab Small's long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| Ab Small vs. Small Cap Core | Ab Small vs. Aquagold International | Ab Small vs. Morningstar Unconstrained Allocation | Ab Small vs. Thrivent High Yield |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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