Correlation Between Provident Financial and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Provident Financial 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 Provident Financial and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Provident Financial Holdings and Dow Jones Industrial, you can compare the effects of market volatilities on Provident Financial 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 Provident Financial with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provident Financial and Dow Jones.
Diversification Opportunities for Provident Financial and Dow Jones
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Provident and Dow is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Provident Financial Holdings 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 Provident Financial 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 Provident Financial Holdings 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 Provident Financial i.e., Provident Financial and Dow Jones go up and down completely randomly.
Pair Corralation between Provident Financial and Dow Jones
Given the investment horizon of 90 days Provident Financial Holdings is expected to generate 2.41 times more return on investment than Dow Jones. However, Provident Financial is 2.41 times more volatile than Dow Jones Industrial. It trades about 0.06 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.11 per unit of risk. If you would invest 1,169 in Provident Financial Holdings on September 2, 2024 and sell it today you would earn a total of 453.00 from holding Provident Financial Holdings or generate 38.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Provident Financial Holdings vs. Dow Jones Industrial
Performance |
| Timeline |
Provident Financial and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Provident Financial Holdings
Pair trading matchups for Provident Financial
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Provident Financial and Dow Jones
The main advantage of trading using opposite Provident Financial and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Financial 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.| Provident Financial vs. Home Federal Bancorp | Provident Financial vs. Magyar Bancorp | Provident Financial vs. Community West Bancshares | Provident Financial vs. First Northwest Bancorp |
| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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