Correlation Between Great Elm and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Great Elm 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 Great Elm and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Elm Capital and Dow Jones Industrial, you can compare the effects of market volatilities on Great Elm 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 Great Elm with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and Dow Jones.
Diversification Opportunities for Great Elm and Dow Jones
Significant diversification
The 3 months correlation between Great and Dow is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital 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 Great Elm 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 Great Elm Capital 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 Great Elm i.e., Great Elm and Dow Jones go up and down completely randomly.
Pair Corralation between Great Elm and Dow Jones
Assuming the 90 days horizon Great Elm is expected to generate 9.5 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Great Elm Capital is 4.42 times less risky than Dow Jones. It trades about 0.06 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,329,703 in Dow Jones Industrial on October 25, 2024 and sell it today you would earn a total of 85,970 from holding Dow Jones Industrial or generate 1.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Great Elm Capital vs. Dow Jones Industrial
Performance |
| Timeline |
Great Elm and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Great Elm Capital
Pair trading matchups for Great Elm
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Great Elm and Dow Jones
The main advantage of trading using opposite Great Elm and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Elm 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.| Great Elm vs. National Beverage Corp | Great Elm vs. Nascent Wine | Great Elm vs. The Mosaic | Great Elm vs. Codexis |
| Dow Jones vs. Xiabuxiabu Catering Management | Dow Jones vs. Neogen | Dow Jones vs. Orion Office Reit | Dow Jones vs. Bassett Furniture Industries |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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