Correlation Between Selected International and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Selected International 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 International 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 International Fund and Dow Jones Industrial, you can compare the effects of market volatilities on Selected International 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 International with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Selected International and Dow Jones.
Diversification Opportunities for Selected International and Dow Jones
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Selected and Dow is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Selected International 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 Selected International 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 International 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 Selected International i.e., Selected International and Dow Jones go up and down completely randomly.
Pair Corralation between Selected International and Dow Jones
Assuming the 90 days horizon Selected International Fund is expected to under-perform the Dow Jones. In addition to that, Selected International is 2.05 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 0.16 per unit of volatility. If you would invest 4,233,015 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 239,191 from holding Dow Jones Industrial or generate 5.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Selected International Fund vs. Dow Jones Industrial
Performance |
| Timeline |
Selected International and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Selected International Fund
Pair trading matchups for Selected International
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Selected International and Dow Jones
The main advantage of trading using opposite Selected International and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selected International 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 International vs. Selected American Shares | Selected International vs. Amg Managers Brandywine | Selected International vs. Marsico Growth Fund | Selected International vs. Litman Gregory Masters |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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