Correlation Between Selected American and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Selected American 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 Selected American and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Selected American Shares and Dow Jones Industrial, you can compare the effects of market volatilities on Selected American 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 Selected American with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Selected American and Dow Jones.
Diversification Opportunities for Selected American and Dow Jones
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Selected and Dow is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Selected American Shares 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 Selected American 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 Selected American Shares 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 Selected American i.e., Selected American and Dow Jones go up and down completely randomly.
Pair Corralation between Selected American and Dow Jones
Assuming the 90 days horizon Selected American is expected to generate 1.6 times less return on investment than Dow Jones. In addition to that, Selected American is 1.57 times more volatile than Dow Jones Industrial. It trades about 0.03 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of volatility. If you would invest 3,408,927 in Dow Jones Industrial on November 5, 2024 and sell it today you would earn a total of 1,045,539 from holding Dow Jones Industrial or generate 30.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Selected American Shares vs. Dow Jones Industrial
Performance |
| Timeline |
Selected American and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Selected American Shares
Pair trading matchups for Selected American
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Selected American and Dow Jones
The main advantage of trading using opposite Selected American and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selected American 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.| Selected American vs. Marsico Focus Fund | Selected American vs. Artisan International Fund | Selected American vs. Third Avenue Value | Selected American vs. Oakmark Select Fund |
| Dow Jones vs. Fernhill Beverage | Dow Jones vs. Fomento Economico Mexicano | Dow Jones vs. Loud Beverage Group | Dow Jones vs. Diageo PLC ADR |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Global Correlations Find global opportunities by holding instruments from different markets |