Correlation Between First Western and Dow Jones
Can any of the company-specific risk be diversified away by investing in both First Western 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 First Western and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Western Financial and Dow Jones Industrial, you can compare the effects of market volatilities on First Western 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 First Western with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Western and Dow Jones.
Diversification Opportunities for First Western and Dow Jones
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Dow is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Western Financial 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 First Western 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 First Western Financial 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 First Western i.e., First Western and Dow Jones go up and down completely randomly.
Pair Corralation between First Western and Dow Jones
Given the investment horizon of 90 days First Western Financial is expected to under-perform the Dow Jones. In addition to that, First Western is 4.02 times more volatile than Dow Jones Industrial. It trades about -0.01 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of volatility. If you would invest 3,359,634 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 1,070,017 from holding Dow Jones Industrial or generate 31.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Western Financial vs. Dow Jones Industrial
Performance |
| Timeline |
First Western and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
First Western Financial
Pair trading matchups for First Western
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with First Western and Dow Jones
The main advantage of trading using opposite First Western and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Western 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.| First Western vs. Home Federal Bancorp | First Western vs. First Financial Northwest | First Western vs. First Northwest Bancorp | First Western vs. First Capital |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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