Correlation Between Finance Of and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Finance Of 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 Finance Of and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Finance of America and Dow Jones Industrial, you can compare the effects of market volatilities on Finance Of 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 Finance Of with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finance Of and Dow Jones.
Diversification Opportunities for Finance Of and Dow Jones
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Finance and Dow is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Finance of America 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 Finance Of 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 Finance of America 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 Finance Of i.e., Finance Of and Dow Jones go up and down completely randomly.
Pair Corralation between Finance Of and Dow Jones
Considering the 90-day investment horizon Finance of America is expected to generate 8.31 times more return on investment than Dow Jones. However, Finance Of is 8.31 times more volatile than Dow Jones Industrial. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 1,470 in Finance of America on August 28, 2024 and sell it today you would earn a total of 506.00 from holding Finance of America or generate 34.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Finance of America vs. Dow Jones Industrial
Performance |
| Timeline |
Finance Of and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Finance of America
Pair trading matchups for Finance Of
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Finance Of and Dow Jones
The main advantage of trading using opposite Finance Of and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finance Of 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.| Finance Of vs. Regional Management Corp | Finance Of vs. Orix Corp Ads | Finance Of vs. FirstCash | Finance Of vs. EZCORP Inc |
| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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