Correlation Between Somerset Trust and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Somerset Trust 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 Somerset Trust and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Somerset Trust Holding and Dow Jones Industrial, you can compare the effects of market volatilities on Somerset Trust 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 Somerset Trust with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Somerset Trust and Dow Jones.
Diversification Opportunities for Somerset Trust and Dow Jones
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Somerset and Dow is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Somerset Trust Holding 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 Somerset Trust 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 Somerset Trust Holding 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 Somerset Trust i.e., Somerset Trust and Dow Jones go up and down completely randomly.
Pair Corralation between Somerset Trust and Dow Jones
Given the investment horizon of 90 days Somerset Trust Holding is expected to generate 4.44 times more return on investment than Dow Jones. However, Somerset Trust is 4.44 times more volatile than Dow Jones Industrial. It trades about 0.03 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 4,000 in Somerset Trust Holding on August 30, 2024 and sell it today you would earn a total of 489.00 from holding Somerset Trust Holding or generate 12.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 82.42% |
| Values | Daily Returns |
Somerset Trust Holding vs. Dow Jones Industrial
Performance |
| Timeline |
Somerset Trust and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Somerset Trust Holding
Pair trading matchups for Somerset Trust
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Somerset Trust and Dow Jones
The main advantage of trading using opposite Somerset Trust and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Somerset Trust 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.| Somerset Trust vs. Potomac Bancshares | Somerset Trust vs. Apollo Bancorp | Somerset Trust vs. The Farmers Bank | Somerset Trust vs. 1ST SUMMIT BANCORP |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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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