Correlation Between Global Franchise and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Global Franchise 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 Global Franchise and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Franchise Portfolio and Dow Jones Industrial, you can compare the effects of market volatilities on Global Franchise 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 Global Franchise with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Franchise and Dow Jones.
Diversification Opportunities for Global Franchise and Dow Jones
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Global and Dow is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Global Franchise Portfolio 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 Global Franchise 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 Global Franchise Portfolio 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 Global Franchise i.e., Global Franchise and Dow Jones go up and down completely randomly.
Pair Corralation between Global Franchise and Dow Jones
Assuming the 90 days horizon Global Franchise is expected to generate 33.48 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Global Franchise Portfolio is 1.74 times less risky than Dow Jones. It trades about 0.01 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Franchise Portfolio vs. Dow Jones Industrial
Performance |
| Timeline |
Global Franchise and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Global Franchise Portfolio
Pair trading matchups for Global Franchise
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Global Franchise and Dow Jones
The main advantage of trading using opposite Global Franchise and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Franchise 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.| Global Franchise vs. Dreyfus Technology Growth | Global Franchise vs. Pgim Jennison Technology | Global Franchise vs. Technology Ultrasector Profund | Global Franchise vs. Janus Global Technology |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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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