Correlation Between First Investors and Dow Jones
Can any of the company-specific risk be diversified away by investing in both First Investors 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 First Investors and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Investors Select and Dow Jones Industrial, you can compare the effects of market volatilities on First Investors 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 First Investors with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Investors and Dow Jones.
Diversification Opportunities for First Investors and Dow Jones
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Dow is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding First Investors Select 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 First Investors 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 First Investors Select 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 First Investors i.e., First Investors and Dow Jones go up and down completely randomly.
Pair Corralation between First Investors and Dow Jones
Assuming the 90 days horizon First Investors is expected to generate 1.21 times less return on investment than Dow Jones. In addition to that, First Investors is 1.18 times more volatile than Dow Jones Industrial. It trades about 0.23 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.33 per unit of volatility. If you would invest 4,263,520 in Dow Jones Industrial on November 9, 2024 and sell it today you would earn a total of 211,243 from holding Dow Jones Industrial or generate 4.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Investors Select vs. Dow Jones Industrial
Performance |
| Timeline |
First Investors and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
First Investors Select
Pair trading matchups for First Investors
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with First Investors and Dow Jones
The main advantage of trading using opposite First Investors and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Investors 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.| First Investors vs. Real Estate Ultrasector | First Investors vs. Cohen Steers Real | First Investors vs. Redwood Real Estate | First Investors vs. Prudential Real Estate |
| Dow Jones vs. Douglas Emmett | Dow Jones vs. Todos Medical | Dow Jones vs. Eastern Co | Dow Jones vs. Merit Medical Systems |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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