Correlation Between Dow Jones and Security National
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Security National 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 Security National 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 Security National Financial, you can compare the effects of market volatilities on Dow Jones and Security National 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 Security National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Security National.
Diversification Opportunities for Dow Jones and Security National
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Security is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Security National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Security National 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 Security National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Security National has no effect on the direction of Dow Jones i.e., Dow Jones and Security National go up and down completely randomly.
Pair Corralation between Dow Jones and Security National
Assuming the 90 days trading horizon Dow Jones is expected to generate 8.3 times less return on investment than Security National. But when comparing it to its historical volatility, Dow Jones Industrial is 3.14 times less risky than Security National. It trades about 0.15 of its potential returns per unit of risk. Security National Financial is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 975.00 in Security National Financial on August 24, 2024 and sell it today you would earn a total of 287.00 from holding Security National Financial or generate 29.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Security National Financial
Performance |
| Timeline |
Dow Jones and Security National Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Security National Financial
Pair trading matchups for Security National
Pair Trading with Dow Jones and Security National
The main advantage of trading using opposite Dow Jones and Security National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Security National 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 Security National will offset losses from the drop in Security National's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Security National vs. Guild Holdings Co | Security National vs. Encore Capital Group | Security National vs. PennyMac Finl Svcs | Security National vs. CNFinance Holdings |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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