Correlation Between Dow Jones and SGI Enhanced
Can any of the company-specific risk be diversified away by investing in both Dow Jones and SGI Enhanced 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 SGI Enhanced 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 SGI Enhanced Core, you can compare the effects of market volatilities on Dow Jones and SGI Enhanced 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 SGI Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and SGI Enhanced.
Diversification Opportunities for Dow Jones and SGI Enhanced
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and SGI is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and SGI Enhanced Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGI Enhanced Core 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 SGI Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGI Enhanced Core has no effect on the direction of Dow Jones i.e., Dow Jones and SGI Enhanced go up and down completely randomly.
Pair Corralation between Dow Jones and SGI Enhanced
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 6.89 times more return on investment than SGI Enhanced. However, Dow Jones is 6.89 times more volatile than SGI Enhanced Core. It trades about 0.07 of its potential returns per unit of risk. SGI Enhanced Core is currently generating about 0.35 per unit of risk. If you would invest 4,338,960 in Dow Jones Industrial on September 18, 2024 and sell it today you would earn a total of 32,788 from holding Dow Jones Industrial or generate 0.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Dow Jones Industrial vs. SGI Enhanced Core
Performance |
| Timeline |
Dow Jones and SGI Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
SGI Enhanced Core
Pair trading matchups for SGI Enhanced
Pair Trading with Dow Jones and SGI Enhanced
The main advantage of trading using opposite Dow Jones and SGI Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, SGI Enhanced 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 SGI Enhanced will offset losses from the drop in SGI Enhanced's long position.| Dow Jones vs. Commonwealth Bank of | Dow Jones vs. AmTrust Financial Services | Dow Jones vs. Forsys Metals Corp | Dow Jones vs. Juniata Valley Financial |
| SGI Enhanced vs. ClearShares Ultra Short Maturity | SGI Enhanced vs. PGIM Active High | SGI Enhanced vs. Pacer Trendpilot Bond | SGI Enhanced vs. Pacer Lunt Large |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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