Correlation Between Dow Jones and Steward Large
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Steward Large 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 Steward Large 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 Steward Large Cap, you can compare the effects of market volatilities on Dow Jones and Steward Large 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 Steward Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Steward Large.
Diversification Opportunities for Dow Jones and Steward Large
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Steward is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Steward Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Large 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 Steward Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Large Cap has no effect on the direction of Dow Jones i.e., Dow Jones and Steward Large go up and down completely randomly.
Pair Corralation between Dow Jones and Steward Large
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.18 times more return on investment than Steward Large. However, Dow Jones is 1.18 times more volatile than Steward Large Cap. It trades about 0.26 of its potential returns per unit of risk. Steward Large Cap is currently generating about 0.19 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Steward Large Cap
Performance |
| Timeline |
Dow Jones and Steward Large Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Steward Large Cap
Pair trading matchups for Steward Large
Pair Trading with Dow Jones and Steward Large
The main advantage of trading using opposite Dow Jones and Steward Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Steward Large 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 Steward Large will offset losses from the drop in Steward Large's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Steward Large vs. Vanguard Total Stock | Steward Large vs. Vanguard 500 Index | Steward Large vs. Vanguard Total Stock | Steward Large vs. Vanguard Total Stock |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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