Correlation Between Prime Dividend and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Prime Dividend 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 Prime Dividend and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prime Dividend Corp and Dow Jones Industrial, you can compare the effects of market volatilities on Prime Dividend 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 Prime Dividend with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Dividend and Dow Jones.
Diversification Opportunities for Prime Dividend and Dow Jones
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prime and Dow is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Prime Dividend Corp 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 Prime Dividend 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 Prime Dividend Corp 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 Prime Dividend i.e., Prime Dividend and Dow Jones go up and down completely randomly.
Pair Corralation between Prime Dividend and Dow Jones
Assuming the 90 days trading horizon Prime Dividend Corp is expected to generate 2.18 times more return on investment than Dow Jones. However, Prime Dividend is 2.18 times more volatile than Dow Jones Industrial. It trades about 0.21 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of risk. If you would invest 718.00 in Prime Dividend Corp on August 26, 2024 and sell it today you would earn a total of 117.00 from holding Prime Dividend Corp or generate 16.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.73% |
| Values | Daily Returns |
Prime Dividend Corp vs. Dow Jones Industrial
Performance |
| Timeline |
Prime Dividend and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Prime Dividend Corp
Pair trading matchups for Prime Dividend
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Prime Dividend and Dow Jones
The main advantage of trading using opposite Prime Dividend and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Dividend 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.| Prime Dividend vs. TDb Split Corp | Prime Dividend vs. Dividend Select 15 | Prime Dividend vs. Canadian Life Companies | Prime Dividend vs. Brompton Lifeco Split |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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