Correlation Between Stone Ridge and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Stone Ridge 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 Stone Ridge and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stone Ridge 2060 and Dow Jones Industrial, you can compare the effects of market volatilities on Stone Ridge 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 Stone Ridge with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Dow Jones.
Diversification Opportunities for Stone Ridge and Dow Jones
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Stone and Dow is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge 2060 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 Stone Ridge 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 Stone Ridge 2060 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 Stone Ridge i.e., Stone Ridge and Dow Jones go up and down completely randomly.
Pair Corralation between Stone Ridge and Dow Jones
Given the investment horizon of 90 days Stone Ridge 2060 is expected to under-perform the Dow Jones. But the etf apears to be less risky and, when comparing its historical volatility, Stone Ridge 2060 is 1.17 times less risky than Dow Jones. The etf trades about -0.14 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 4,233,015 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 253,016 from holding Dow Jones Industrial or generate 5.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stone Ridge 2060 vs. Dow Jones Industrial
Performance |
| Timeline |
Stone Ridge and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Stone Ridge 2060
Pair trading matchups for Stone Ridge
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Stone Ridge and Dow Jones
The main advantage of trading using opposite Stone Ridge and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge 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.| Stone Ridge vs. Global X Funds | Stone Ridge vs. US Treasury 12 | Stone Ridge vs. Tidal Trust II | Stone Ridge vs. Franklin Liberty Treasury |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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