Correlation Between Portfolio and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Portfolio 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 Portfolio and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Portfolio 21 Global and Dow Jones Industrial, you can compare the effects of market volatilities on Portfolio 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 Portfolio with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Portfolio and Dow Jones.
Diversification Opportunities for Portfolio and Dow Jones
Modest diversification
The 3 months correlation between Portfolio and Dow is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Portfolio 21 Global 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 Portfolio 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 Portfolio 21 Global 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 Portfolio i.e., Portfolio and Dow Jones go up and down completely randomly.
Pair Corralation between Portfolio and Dow Jones
Assuming the 90 days horizon Portfolio 21 Global is expected to under-perform the Dow Jones. But the mutual fund apears to be less risky and, when comparing its historical volatility, Portfolio 21 Global is 1.26 times less risky than Dow Jones. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 4,124,052 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 305,599 from holding Dow Jones Industrial or generate 7.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Portfolio 21 Global vs. Dow Jones Industrial
Performance |
| Timeline |
Portfolio and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Portfolio 21 Global
Pair trading matchups for Portfolio
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Portfolio and Dow Jones
The main advantage of trading using opposite Portfolio and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Portfolio 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.| Portfolio vs. New Alternatives Fund | Portfolio vs. Green Century Equity | Portfolio vs. Green Century Balanced | Portfolio vs. Neuberger Berman Socially |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |