Correlation Between Dow Jones and Vanguard Value
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Vanguard Value 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 Dow Jones and Vanguard Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Vanguard Value Index, you can compare the effects of market volatilities on Dow Jones and Vanguard Value 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 Dow Jones with a short position of Vanguard Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Vanguard Value.
Diversification Opportunities for Dow Jones and Vanguard Value
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Vanguard Value Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Value Index and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Vanguard Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Value Index has no effect on the direction of Dow Jones i.e., Dow Jones and Vanguard Value go up and down completely randomly.
Pair Corralation between Dow Jones and Vanguard Value
Assuming the 90 days horizon Dow Jones is expected to generate 1.11 times less return on investment than Vanguard Value. In addition to that, Dow Jones is 1.03 times more volatile than Vanguard Value Index. It trades about 0.07 of its total potential returns per unit of risk. Vanguard Value Index is currently generating about 0.08 per unit of volatility. If you would invest 5,348 in Vanguard Value Index on September 3, 2024 and sell it today you would earn a total of 1,741 from holding Vanguard Value Index or generate 32.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Vanguard Value Index
Performance |
| Timeline |
| Dow Jones Industrial |
| Vanguard Value Index |
Dow Jones and Vanguard Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow Jones and Vanguard Value
The main advantage of trading using opposite Dow Jones and Vanguard Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Vanguard Value 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 Vanguard Value will offset losses from the drop in Vanguard Value's long position.| Dow Jones vs. Vanguard Value Index | Dow Jones vs. Dodge Cox Stock | Dow Jones vs. American Funds American | Dow Jones vs. American Funds American |
| Vanguard Value vs. Dodge Cox Stock | Vanguard Value vs. American Funds American | Vanguard Value vs. American Funds American | Vanguard Value vs. American Mutual Fund |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |