Correlation Between Swan Hedged and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Swan Hedged 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 Swan Hedged and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swan Hedged Equity and Dow Jones Industrial, you can compare the effects of market volatilities on Swan Hedged 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 Swan Hedged with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swan Hedged and Dow Jones.
Diversification Opportunities for Swan Hedged and Dow Jones
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Swan and Dow is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Swan Hedged Equity 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 Swan Hedged 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 Swan Hedged Equity 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 Swan Hedged i.e., Swan Hedged and Dow Jones go up and down completely randomly.
Pair Corralation between Swan Hedged and Dow Jones
Given the investment horizon of 90 days Swan Hedged is expected to generate 2.19 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Swan Hedged Equity is 1.28 times less risky than Dow Jones. It trades about 0.12 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 4,348,783 in Dow Jones Industrial on November 18, 2024 and sell it today you would earn a total of 105,825 from holding Dow Jones Industrial or generate 2.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Swan Hedged Equity vs. Dow Jones Industrial
Performance |
| Timeline |
Swan Hedged and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Swan Hedged Equity
Pair trading matchups for Swan Hedged
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Swan Hedged and Dow Jones
The main advantage of trading using opposite Swan Hedged and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swan Hedged 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.| Swan Hedged vs. Amplify BlackSwan Growth | Swan Hedged vs. Invesco SP 500 | Swan Hedged vs. Simplify Exchange Traded | Swan Hedged vs. Simplify Equity PLUS |
| Dow Jones vs. Palomar Holdings | Dow Jones vs. Mesa Air Group | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Unum Group |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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