Correlation Between Equity Residential and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Equity Residential 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 Equity Residential and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Residential and Dow Jones Industrial, you can compare the effects of market volatilities on Equity Residential 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 Equity Residential with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Residential and Dow Jones.
Diversification Opportunities for Equity Residential and Dow Jones
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Equity and Dow is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Equity Residential 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 Equity Residential 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 Equity Residential 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 Equity Residential i.e., Equity Residential and Dow Jones go up and down completely randomly.
Pair Corralation between Equity Residential and Dow Jones
Considering the 90-day investment horizon Equity Residential is expected to generate 1.83 times more return on investment than Dow Jones. However, Equity Residential is 1.83 times more volatile than Dow Jones Industrial. It trades about 0.06 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.09 per unit of risk. If you would invest 5,516 in Equity Residential on August 28, 2024 and sell it today you would earn a total of 2,125 from holding Equity Residential or generate 38.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Residential vs. Dow Jones Industrial
Performance |
| Timeline |
Equity Residential and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Equity Residential
Pair trading matchups for Equity Residential
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Equity Residential and Dow Jones
The main advantage of trading using opposite Equity Residential and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Residential 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.| Equity Residential vs. Essex Property Trust | Equity Residential vs. Mid America Apartment Communities | Equity Residential vs. Camden Property Trust | Equity Residential vs. UDR Inc |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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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