Correlation Between Dow Jones and Vanguard Star
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Vanguard 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 Vanguard 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 Vanguard Star Fund, you can compare the effects of market volatilities on Dow Jones and Vanguard 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 Vanguard Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Vanguard Star.
Diversification Opportunities for Dow Jones and Vanguard Star
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Vanguard is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Vanguard Star Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Star 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 Vanguard Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Star has no effect on the direction of Dow Jones i.e., Dow Jones and Vanguard Star go up and down completely randomly.
Pair Corralation between Dow Jones and Vanguard Star
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.6 times more return on investment than Vanguard Star. However, Dow Jones is 1.6 times more volatile than Vanguard Star Fund. It trades about 0.2 of its potential returns per unit of risk. Vanguard Star Fund is currently generating about 0.12 per unit of risk. If you would invest 4,093,693 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 397,372 from holding Dow Jones Industrial or generate 9.71% 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. Vanguard Star Fund
Performance |
| Timeline |
Dow Jones and Vanguard Star Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Vanguard Star Fund
Pair trading matchups for Vanguard Star
Pair Trading with Dow Jones and Vanguard Star
The main advantage of trading using opposite Dow Jones and Vanguard Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Vanguard 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 Vanguard Star will offset losses from the drop in Vanguard 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 |
| Vanguard Star vs. Vanguard Wellington Fund | Vanguard Star vs. Vanguard Wellesley Income | Vanguard Star vs. Vanguard Windsor Ii | Vanguard Star vs. Vanguard Health Care |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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