Correlation Between Dow Jones and AB Active
Can any of the company-specific risk be diversified away by investing in both Dow Jones and AB Active 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 Active 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 Active ETFs,, you can compare the effects of market volatilities on Dow Jones and AB Active 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 Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and AB Active.
Diversification Opportunities for Dow Jones and AB Active
Good diversification
The 3 months correlation between Dow and TAFL is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and AB Active ETFs, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Active ETFs, 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 Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Active ETFs, has no effect on the direction of Dow Jones i.e., Dow Jones and AB Active go up and down completely randomly.
Pair Corralation between Dow Jones and AB Active
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.47 times more return on investment than AB Active. However, Dow Jones is 2.47 times more volatile than AB Active ETFs,. It trades about 0.16 of its potential returns per unit of risk. AB Active ETFs, is currently generating about 0.1 per unit of risk. If you would invest 3,880,733 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 610,332 from holding Dow Jones Industrial or generate 15.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. AB Active ETFs,
Performance |
| Timeline |
Dow Jones and AB Active Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
AB Active ETFs,
Pair trading matchups for AB Active
Pair Trading with Dow Jones and AB Active
The main advantage of trading using opposite Dow Jones and AB Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, AB Active 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 Active will offset losses from the drop in AB Active's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| AB Active vs. SSGA Active Trust | AB Active vs. SPDR Nuveen Municipal | AB Active vs. iShares Short Maturity | AB Active vs. First Trust Flexible |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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