Correlation Between Desjardins American and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Desjardins American and Dow Jones 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 Desjardins American and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Desjardins American Equity and Dow Jones Industrial, you can compare the effects of market volatilities on Desjardins American and Dow Jones 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 Desjardins American with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desjardins American and Dow Jones.
Diversification Opportunities for Desjardins American and Dow Jones
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Desjardins and Dow is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins American Equity and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Desjardins American 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 Desjardins American Equity are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Desjardins American i.e., Desjardins American and Dow Jones go up and down completely randomly.
Pair Corralation between Desjardins American and Dow Jones
Assuming the 90 days trading horizon Desjardins American Equity is expected to generate 0.9 times more return on investment than Dow Jones. However, Desjardins American Equity is 1.11 times less risky than Dow Jones. It trades about 0.27 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of risk. If you would invest 2,237 in Desjardins American Equity on August 30, 2024 and sell it today you would earn a total of 195.00 from holding Desjardins American Equity or generate 8.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.73% |
| Values | Daily Returns |
Desjardins American Equity vs. Dow Jones Industrial
Performance |
| Timeline |
Desjardins American and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Desjardins American Equity
Pair trading matchups for Desjardins American
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Desjardins American and Dow Jones
The main advantage of trading using opposite Desjardins American and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Desjardins American position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Desjardins American vs. Desjardins RI Canada | Desjardins American vs. Desjardins RI Canada | Desjardins American vs. Desjardins Canadian Corporate | Desjardins American vs. Desjardins 1 5 Year |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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