Correlation Between Dow Jones and Vanguard Wellington
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Vanguard Wellington 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 Wellington 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 Wellington Fund, you can compare the effects of market volatilities on Dow Jones and Vanguard Wellington 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 Wellington. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Vanguard Wellington.
Diversification Opportunities for Dow Jones and Vanguard Wellington
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 Wellington Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Wellington 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 Wellington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Wellington has no effect on the direction of Dow Jones i.e., Dow Jones and Vanguard Wellington go up and down completely randomly.
Pair Corralation between Dow Jones and Vanguard Wellington
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.17 times more return on investment than Vanguard Wellington. However, Dow Jones is 1.17 times more volatile than Vanguard Wellington Fund. It trades about 0.08 of its potential returns per unit of risk. Vanguard Wellington Fund is currently generating about 0.07 per unit of risk. If you would invest 3,394,710 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 1,034,941 from holding Dow Jones Industrial or generate 30.49% 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 Wellington Fund
Performance |
| Timeline |
Dow Jones and Vanguard Wellington Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Vanguard Wellington Fund
Pair trading matchups for Vanguard Wellington
Pair Trading with Dow Jones and Vanguard Wellington
The main advantage of trading using opposite Dow Jones and Vanguard Wellington positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Vanguard Wellington 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 Wellington will offset losses from the drop in Vanguard Wellington's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Vanguard Wellington vs. American Funds American | Vanguard Wellington vs. American Funds American | Vanguard Wellington vs. American Balanced | Vanguard Wellington vs. American Balanced Fund |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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