Correlation Between Frost Credit and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Frost Credit 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 Frost Credit and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frost Credit Fund and Dow Jones Industrial, you can compare the effects of market volatilities on Frost Credit 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 Frost Credit with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frost Credit and Dow Jones.
Diversification Opportunities for Frost Credit and Dow Jones
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Frost and Dow is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Frost Credit Fund 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 Frost Credit 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 Frost Credit Fund 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 Frost Credit i.e., Frost Credit and Dow Jones go up and down completely randomly.
Pair Corralation between Frost Credit and Dow Jones
Assuming the 90 days horizon Frost Credit is expected to generate 14.5 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Frost Credit Fund is 4.04 times less risky than Dow Jones. It trades about 0.1 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Frost Credit Fund vs. Dow Jones Industrial
Performance |
| Timeline |
Frost Credit and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Frost Credit Fund
Pair trading matchups for Frost Credit
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Frost Credit and Dow Jones
The main advantage of trading using opposite Frost Credit and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frost Credit 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.| Frost Credit vs. Frost Growth Equity | Frost Credit vs. Frost Low Duration | Frost Credit vs. Frost Total Return | Frost Credit vs. Frost Total Return |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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