Correlation Between Dividend Opportunities and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Dividend Opportunities 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 Dividend Opportunities and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dividend Opportunities Fund and Dow Jones Industrial, you can compare the effects of market volatilities on Dividend Opportunities 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 Dividend Opportunities with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend Opportunities and Dow Jones.
Diversification Opportunities for Dividend Opportunities and Dow Jones
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dividend and Dow is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dividend Opportunities 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 Dividend Opportunities 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 Dividend Opportunities 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 Dividend Opportunities i.e., Dividend Opportunities and Dow Jones go up and down completely randomly.
Pair Corralation between Dividend Opportunities and Dow Jones
Assuming the 90 days horizon Dividend Opportunities is expected to generate 2.59 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Dividend Opportunities Fund is 2.45 times less risky than Dow Jones. It trades about 0.33 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 4,179,460 in Dow Jones Industrial on September 4, 2024 and sell it today you would earn a total of 291,093 from holding Dow Jones Industrial or generate 6.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dividend Opportunities Fund vs. Dow Jones Industrial
Performance |
| Timeline |
Dividend Opportunities and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Dividend Opportunities Fund
Pair trading matchups for Dividend Opportunities
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Dividend Opportunities and Dow Jones
The main advantage of trading using opposite Dividend Opportunities and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dividend Opportunities 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.| Dividend Opportunities vs. Dynamic Growth Fund | Dividend Opportunities vs. Spectrum Fund Retail | Dividend Opportunities vs. Muirfield Fund Retail | Dividend Opportunities vs. Quantex Fund Retail |
| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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