Correlation Between All Asset and Dow Jones
Can any of the company-specific risk be diversified away by investing in both All Asset 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 All Asset and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between All Asset Fund and Dow Jones Industrial, you can compare the effects of market volatilities on All Asset 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 All Asset with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of All Asset and Dow Jones.
Diversification Opportunities for All Asset and Dow Jones
Weak diversification
The 3 months correlation between All and Dow is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding All Asset Fund 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 All Asset 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 All Asset Fund 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 All Asset i.e., All Asset and Dow Jones go up and down completely randomly.
Pair Corralation between All Asset and Dow Jones
Assuming the 90 days horizon All Asset Fund is expected to under-perform the Dow Jones. But the mutual fund apears to be less risky and, when comparing its historical volatility, All Asset Fund is 2.97 times less risky than Dow Jones. The mutual fund trades about -0.23 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 4,135,093 in Dow Jones Industrial on January 11, 2025 and sell it today you would lose (113,822) from holding Dow Jones Industrial or give up 2.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
All Asset Fund vs. Dow Jones Industrial
Performance |
| Timeline |
All Asset and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
All Asset Fund
Pair trading matchups for All Asset
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with All Asset and Dow Jones
The main advantage of trading using opposite All Asset and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if All Asset 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.| All Asset vs. The Hartford Healthcare | All Asset vs. Fidelity Advisor Health | All Asset vs. Deutsche Health And | All Asset vs. Schwab Health Care |
| Dow Jones vs. The Joint Corp | Dow Jones vs. Falcon Metals Limited | Dow Jones vs. VirnetX Holding Corp | Dow Jones vs. Western Copper and |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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