Correlation Between Newfound Risk and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Newfound Risk 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 Newfound Risk and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newfound Risk Managed and Dow Jones Industrial, you can compare the effects of market volatilities on Newfound Risk 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 Newfound Risk with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newfound Risk and Dow Jones.
Diversification Opportunities for Newfound Risk and Dow Jones
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Newfound and Dow is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Newfound Risk Managed 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 Newfound Risk 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 Newfound Risk Managed 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 Newfound Risk i.e., Newfound Risk and Dow Jones go up and down completely randomly.
Pair Corralation between Newfound Risk and Dow Jones
If you would invest 3,640,493 in Dow Jones Industrial on September 4, 2024 and sell it today you would earn a total of 830,060 from holding Dow Jones Industrial or generate 22.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.4% |
| Values | Daily Returns |
Newfound Risk Managed vs. Dow Jones Industrial
Performance |
| Timeline |
Newfound Risk and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Newfound Risk Managed
Pair trading matchups for Newfound Risk
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Newfound Risk and Dow Jones
The main advantage of trading using opposite Newfound Risk and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newfound Risk 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.| Newfound Risk vs. Barings Global Floating | Newfound Risk vs. Ab Global Bond | Newfound Risk vs. Nationwide Global Equity | Newfound Risk vs. Alliancebernstein Global High |
| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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