Correlation Between Sound Shore and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Sound Shore 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 Sound Shore and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sound Shore Fund and Dow Jones Industrial, you can compare the effects of market volatilities on Sound Shore 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 Sound Shore with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Shore and Dow Jones.
Diversification Opportunities for Sound Shore and Dow Jones
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sound and Dow is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Sound Shore 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 Sound Shore 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 Sound Shore 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 Sound Shore i.e., Sound Shore and Dow Jones go up and down completely randomly.
Pair Corralation between Sound Shore and Dow Jones
Assuming the 90 days horizon Sound Shore Fund is expected to generate 1.26 times more return on investment than Dow Jones. However, Sound Shore is 1.26 times more volatile than Dow Jones Industrial. It trades about 0.07 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 3,689 in Sound Shore Fund on August 26, 2024 and sell it today you would earn a total of 1,370 from holding Sound Shore Fund or generate 37.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sound Shore Fund vs. Dow Jones Industrial
Performance |
| Timeline |
Sound Shore and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Sound Shore Fund
Pair trading matchups for Sound Shore
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Sound Shore and Dow Jones
The main advantage of trading using opposite Sound Shore and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sound Shore 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.| Sound Shore vs. Hartford Schroders Smallmid | Sound Shore vs. Hartford Schroders Smallmid | Sound Shore vs. Praxis Growth Index | Sound Shore vs. Ab E Opportunities |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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