Correlation Between Disciplined Value and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Disciplined 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 Disciplined 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 Disciplined Value Series and Dow Jones Industrial, you can compare the effects of market volatilities on Disciplined 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 Disciplined Value with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disciplined Value and Dow Jones.
Diversification Opportunities for Disciplined Value and Dow Jones
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Disciplined and Dow is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Disciplined Value Series 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 Disciplined 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 Disciplined Value Series 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 Disciplined Value i.e., Disciplined Value and Dow Jones go up and down completely randomly.
Pair Corralation between Disciplined Value and Dow Jones
Assuming the 90 days horizon Disciplined Value Series is expected to generate 0.99 times more return on investment than Dow Jones. However, Disciplined Value Series is 1.01 times less risky than Dow Jones. It trades about 0.29 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of risk. If you would invest 894.00 in Disciplined Value Series on August 30, 2024 and sell it today you would earn a total of 54.00 from holding Disciplined Value Series or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Disciplined Value Series vs. Dow Jones Industrial
Performance |
| Timeline |
Disciplined Value and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Disciplined Value Series
Pair trading matchups for Disciplined Value
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Disciplined Value and Dow Jones
The main advantage of trading using opposite Disciplined Value and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disciplined 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.| Disciplined Value vs. Parametric Emerging Markets | Disciplined Value vs. Equity Series Class | Disciplined Value vs. Pioneer Equity Income | Disciplined Value vs. Artisan Global Value |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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