Correlation Between Dow Jones and SG Blocks
Can any of the company-specific risk be diversified away by investing in both Dow Jones and SG Blocks 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 SG Blocks 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 SG Blocks, you can compare the effects of market volatilities on Dow Jones and SG Blocks 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 SG Blocks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and SG Blocks.
Diversification Opportunities for Dow Jones and SG Blocks
Very good diversification
The 3 months correlation between Dow and SGBX is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and SG Blocks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SG Blocks 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 SG Blocks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SG Blocks has no effect on the direction of Dow Jones i.e., Dow Jones and SG Blocks go up and down completely randomly.
Pair Corralation between Dow Jones and SG Blocks
Assuming the 90 days trading horizon Dow Jones is expected to generate 12.15 times less return on investment than SG Blocks. But when comparing it to its historical volatility, Dow Jones Industrial is 25.47 times less risky than SG Blocks. It trades about 0.36 of its potential returns per unit of risk. SG Blocks is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 48.00 in SG Blocks on November 1, 2024 and sell it today you would earn a total of 22.00 from holding SG Blocks or generate 45.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. SG Blocks
Performance |
| Timeline |
Dow Jones and SG Blocks Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
SG Blocks
Pair trading matchups for SG Blocks
Pair Trading with Dow Jones and SG Blocks
The main advantage of trading using opposite Dow Jones and SG Blocks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, SG Blocks 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 SG Blocks will offset losses from the drop in SG Blocks' long position.| Dow Jones vs. WEC Energy Group | Dow Jones vs. Pure Cycle | Dow Jones vs. Tandy Leather Factory | Dow Jones vs. Tapestry |
| SG Blocks vs. Insteel Industries | SG Blocks vs. Carpenter Technology | SG Blocks vs. Mueller Industries | SG Blocks vs. Northwest Pipe |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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