Correlation Between Growth Fund and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Growth Fund 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 Growth Fund and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund Of and Dow Jones Industrial, you can compare the effects of market volatilities on Growth Fund 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 Growth Fund with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Dow Jones.
Diversification Opportunities for Growth Fund and Dow Jones
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and Dow is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of 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 Growth Fund 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 Growth Fund Of 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 Growth Fund i.e., Growth Fund and Dow Jones go up and down completely randomly.
Pair Corralation between Growth Fund and Dow Jones
Assuming the 90 days horizon Growth Fund Of is expected to generate 1.65 times more return on investment than Dow Jones. However, Growth Fund is 1.65 times more volatile than Dow Jones Industrial. It trades about 0.11 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of risk. If you would invest 5,421 in Growth Fund Of on August 31, 2024 and sell it today you would earn a total of 2,852 from holding Growth Fund Of or generate 52.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Of vs. Dow Jones Industrial
Performance |
| Timeline |
Growth Fund and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Growth Fund Of
Pair trading matchups for Growth Fund
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Growth Fund and Dow Jones
The main advantage of trading using opposite Growth Fund and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund 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.| Growth Fund vs. Europacific Growth Fund | Growth Fund vs. Washington Mutual Investors | Growth Fund vs. Capital World Growth | Growth Fund vs. HUMANA INC |
| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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