Correlation Between Classic Value and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Classic Value 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 Classic Value and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Classic Value Fund and Dow Jones Industrial, you can compare the effects of market volatilities on Classic Value 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 Classic Value with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Classic Value and Dow Jones.
Diversification Opportunities for Classic Value and Dow Jones
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Classic and Dow is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Classic Value 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 Classic Value 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 Classic Value 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 Classic Value i.e., Classic Value and Dow Jones go up and down completely randomly.
Pair Corralation between Classic Value and Dow Jones
Assuming the 90 days horizon Classic Value is expected to generate 1.28 times less return on investment than Dow Jones. In addition to that, Classic Value is 1.33 times more volatile than Dow Jones Industrial. It trades about 0.07 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of volatility. If you would invest 3,595,089 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 834,562 from holding Dow Jones Industrial or generate 23.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Classic Value Fund vs. Dow Jones Industrial
Performance |
| Timeline |
Classic Value and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Classic Value Fund
Pair trading matchups for Classic Value
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Classic Value and Dow Jones
The main advantage of trading using opposite Classic Value and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Classic Value 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.| Classic Value vs. Regional Bank Fund | Classic Value vs. Regional Bank Fund | Classic Value vs. Multimanager Lifestyle Moderate | Classic Value vs. Multimanager Lifestyle Balanced |
| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
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.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Stocks Directory Find actively traded stocks across global markets | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |