Correlation Between Dow Jones and AdvisorShares STAR
Can any of the company-specific risk be diversified away by investing in both Dow Jones and AdvisorShares STAR 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 AdvisorShares STAR 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 AdvisorShares STAR Global, you can compare the effects of market volatilities on Dow Jones and AdvisorShares STAR 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 AdvisorShares STAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and AdvisorShares STAR.
Diversification Opportunities for Dow Jones and AdvisorShares STAR
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and AdvisorShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and AdvisorShares STAR Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares STAR Global 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 AdvisorShares STAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares STAR Global has no effect on the direction of Dow Jones i.e., Dow Jones and AdvisorShares STAR go up and down completely randomly.
Pair Corralation between Dow Jones and AdvisorShares STAR
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.11 times more return on investment than AdvisorShares STAR. However, Dow Jones is 1.11 times more volatile than AdvisorShares STAR Global. It trades about 0.11 of its potential returns per unit of risk. AdvisorShares STAR Global is currently generating about 0.09 per unit of risk. If you would invest 3,406,633 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 1,084,432 from holding Dow Jones Industrial or generate 31.83% 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. AdvisorShares STAR Global
Performance |
| Timeline |
Dow Jones and AdvisorShares STAR Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
AdvisorShares STAR Global
Pair trading matchups for AdvisorShares STAR
Pair Trading with Dow Jones and AdvisorShares STAR
The main advantage of trading using opposite Dow Jones and AdvisorShares STAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, AdvisorShares STAR 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 AdvisorShares STAR will offset losses from the drop in AdvisorShares STAR's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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