Correlation Between Long-term and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Long-term 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 Long-term and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Long Term Government Fund and Dow Jones Industrial, you can compare the effects of market volatilities on Long-term 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 Long-term with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long-term and Dow Jones.
Diversification Opportunities for Long-term and Dow Jones
Pay attention - limited upside
The 3 months correlation between Long-term and Dow is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Long Term Government 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 Long-term 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 Long Term Government 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 Long-term i.e., Long-term and Dow Jones go up and down completely randomly.
Pair Corralation between Long-term and Dow Jones
Assuming the 90 days horizon Long-term is expected to generate 5.32 times less return on investment than Dow Jones. In addition to that, Long-term is 1.02 times more volatile than Dow Jones Industrial. It trades about 0.05 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 per unit of volatility. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Long Term Government Fund vs. Dow Jones Industrial
Performance |
| Timeline |
Long-term and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Long Term Government Fund
Pair trading matchups for Long-term
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Long-term and Dow Jones
The main advantage of trading using opposite Long-term and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long-term 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.| Long-term vs. Conservative Balanced Allocation | Long-term vs. Prudential Core Conservative | Long-term vs. Evaluator Conservative Rms | Long-term vs. Guggenheim Diversified Income |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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