Correlation Between Enstar Group and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Enstar Group 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 Enstar Group and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enstar Group Limited and Dow Jones Industrial, you can compare the effects of market volatilities on Enstar Group 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 Enstar Group with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enstar Group and Dow Jones.
Diversification Opportunities for Enstar Group and Dow Jones
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Enstar and Dow is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Enstar Group Limited 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 Enstar Group 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 Enstar Group Limited 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 Enstar Group i.e., Enstar Group and Dow Jones go up and down completely randomly.
Pair Corralation between Enstar Group and Dow Jones
Given the investment horizon of 90 days Enstar Group is expected to generate 8.55 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Enstar Group Limited is 2.0 times less risky than Dow Jones. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,870,327 in Dow Jones Industrial on November 3, 2024 and sell it today you would earn a total of 584,139 from holding Dow Jones Industrial or generate 15.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enstar Group Limited vs. Dow Jones Industrial
Performance |
| Timeline |
Enstar Group and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Enstar Group Limited
Pair trading matchups for Enstar Group
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Enstar Group and Dow Jones
The main advantage of trading using opposite Enstar Group and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enstar Group 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.| Enstar Group vs. Global Indemnity PLC | Enstar Group vs. Erie Indemnity | Enstar Group vs. AMERISAFE | Enstar Group vs. Diamond Hill Investment |
| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
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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