Correlation Between Listed Funds and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Listed Funds 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 Listed Funds and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Listed Funds Trust and Dow Jones Industrial, you can compare the effects of market volatilities on Listed Funds 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 Listed Funds with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Listed Funds and Dow Jones.
Diversification Opportunities for Listed Funds and Dow Jones
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Listed and Dow is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Listed Funds Trust 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 Listed Funds 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 Listed Funds Trust 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 Listed Funds i.e., Listed Funds and Dow Jones go up and down completely randomly.
Pair Corralation between Listed Funds and Dow Jones
Given the investment horizon of 90 days Listed Funds Trust is expected to generate 0.75 times more return on investment than Dow Jones. However, Listed Funds Trust is 1.34 times less risky than Dow Jones. It trades about 0.17 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.05 per unit of risk. If you would invest 3,623 in Listed Funds Trust on September 13, 2024 and sell it today you would earn a total of 53.00 from holding Listed Funds Trust or generate 1.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Listed Funds Trust vs. Dow Jones Industrial
Performance |
| Timeline |
Listed Funds and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Listed Funds Trust
Pair trading matchups for Listed Funds
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Listed Funds and Dow Jones
The main advantage of trading using opposite Listed Funds and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Listed Funds 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.| Listed Funds vs. FT Vest Equity | Listed Funds vs. Northern Lights | Listed Funds vs. Dimensional International High | Listed Funds vs. JPMorgan Fundamental Data |
| Dow Jones vs. ChampionX | Dow Jones vs. Highway Holdings Limited | Dow Jones vs. Westinghouse Air Brake | Dow Jones vs. Cementos Pacasmayo SAA |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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