Correlation Between Balanced Strategy and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Balanced Strategy 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 Balanced Strategy and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Strategy Fund and Dow Jones Industrial, you can compare the effects of market volatilities on Balanced Strategy 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 Balanced Strategy with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Strategy and Dow Jones.
Diversification Opportunities for Balanced Strategy and Dow Jones
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Balanced and Dow is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Strategy 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 Balanced Strategy 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 Balanced Strategy 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 Balanced Strategy i.e., Balanced Strategy and Dow Jones go up and down completely randomly.
Pair Corralation between Balanced Strategy and Dow Jones
Assuming the 90 days horizon Balanced Strategy Fund is expected to under-perform the Dow Jones. But the mutual fund apears to be less risky and, when comparing its historical volatility, Balanced Strategy Fund is 2.12 times less risky than Dow Jones. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 4,237,436 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 192,215 from holding Dow Jones Industrial or generate 4.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Strategy Fund vs. Dow Jones Industrial
Performance |
| Timeline |
Balanced Strategy and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Balanced Strategy Fund
Pair trading matchups for Balanced Strategy
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Balanced Strategy and Dow Jones
The main advantage of trading using opposite Balanced Strategy and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Strategy 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.| Balanced Strategy vs. American Funds American | Balanced Strategy vs. American Funds American | Balanced Strategy vs. American Balanced | Balanced Strategy vs. American Balanced Fund |
| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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