Correlation Between Small-cap Growth and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Small-cap Growth 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 Small-cap Growth and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Growth Profund and Dow Jones Industrial, you can compare the effects of market volatilities on Small-cap Growth 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 Small-cap Growth with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Growth and Dow Jones.
Diversification Opportunities for Small-cap Growth and Dow Jones
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small-cap and Dow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth Profund 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 Small-cap Growth 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 Small Cap Growth Profund 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 Small-cap Growth i.e., Small-cap Growth and Dow Jones go up and down completely randomly.
Pair Corralation between Small-cap Growth and Dow Jones
Assuming the 90 days horizon Small Cap Growth Profund is expected to generate 1.69 times more return on investment than Dow Jones. However, Small-cap Growth is 1.69 times more volatile than Dow Jones Industrial. It trades about 0.26 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 per unit of risk. If you would invest 11,356 in Small Cap Growth Profund on August 27, 2024 and sell it today you would earn a total of 1,035 from holding Small Cap Growth Profund or generate 9.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth Profund vs. Dow Jones Industrial
Performance |
| Timeline |
Small-cap Growth and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Small Cap Growth Profund
Pair trading matchups for Small-cap Growth
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Small-cap Growth and Dow Jones
The main advantage of trading using opposite Small-cap Growth and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Growth 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.| Small-cap Growth vs. Small Cap Value Profund | Small-cap Growth vs. Mid Cap Growth Profund | Small-cap Growth vs. Mid Cap Value Profund | Small-cap Growth vs. Small Cap Profund Small Cap |
| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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