Correlation Between Dow Jones and Vanguard Mid
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Vanguard Mid 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 Mid 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 Mid Cap Growth, you can compare the effects of market volatilities on Dow Jones and Vanguard Mid 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 Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Vanguard Mid.
Diversification Opportunities for Dow Jones and Vanguard Mid
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Vanguard Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap 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 Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of Dow Jones i.e., Dow Jones and Vanguard Mid go up and down completely randomly.
Pair Corralation between Dow Jones and Vanguard Mid
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.67 times less return on investment than Vanguard Mid. But when comparing it to its historical volatility, Dow Jones Industrial is 1.15 times less risky than Vanguard Mid. It trades about 0.18 of its potential returns per unit of risk. Vanguard Mid Cap Growth is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 23,451 in Vanguard Mid Cap Growth on August 28, 2024 and sell it today you would earn a total of 3,587 from holding Vanguard Mid Cap Growth or generate 15.3% 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. Vanguard Mid Cap Growth
Performance |
| Timeline |
Dow Jones and Vanguard Mid Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Vanguard Mid Cap Growth
Pair trading matchups for Vanguard Mid
Pair Trading with Dow Jones and Vanguard Mid
The main advantage of trading using opposite Dow Jones and Vanguard Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Vanguard Mid 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 Mid will offset losses from the drop in Vanguard Mid's long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| Vanguard Mid vs. Vanguard Small Cap Growth | Vanguard Mid vs. Vanguard Mid Cap Value | Vanguard Mid vs. Vanguard Small Cap Value | Vanguard Mid vs. Vanguard Mid Cap Index |
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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