Correlation Between Old Republic and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Old Republic 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 Old Republic and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Republic International and Dow Jones Industrial, you can compare the effects of market volatilities on Old Republic 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 Old Republic with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Republic and Dow Jones.
Diversification Opportunities for Old Republic and Dow Jones
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Old and Dow is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International 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 Old Republic 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 Old Republic International 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 Old Republic i.e., Old Republic and Dow Jones go up and down completely randomly.
Pair Corralation between Old Republic and Dow Jones
Considering the 90-day investment horizon Old Republic International is expected to generate 1.51 times more return on investment than Dow Jones. However, Old Republic is 1.51 times more volatile than Dow Jones Industrial. It trades about 0.12 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.15 per unit of risk. If you would invest 3,107 in Old Republic International on November 3, 2024 and sell it today you would earn a total of 551.00 from holding Old Republic International or generate 17.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Republic International vs. Dow Jones Industrial
Performance |
| Timeline |
Old Republic and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Old Republic International
Pair trading matchups for Old Republic
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Old Republic and Dow Jones
The main advantage of trading using opposite Old Republic and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Republic 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.| Old Republic vs. Axa Equitable Holdings | Old Republic vs. American International Group | Old Republic vs. Arch Capital Group | Old Republic vs. Sun Life Financial |
| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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