Correlation Between Smead Funds and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Smead Funds 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 Smead Funds and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smead Funds Trust and Dow Jones Industrial, you can compare the effects of market volatilities on Smead Funds 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 Smead Funds with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smead Funds and Dow Jones.
Diversification Opportunities for Smead Funds and Dow Jones
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Smead and Dow is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Smead Funds Trust 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 Smead Funds 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 Smead Funds Trust 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 Smead Funds i.e., Smead Funds and Dow Jones go up and down completely randomly.
Pair Corralation between Smead Funds and Dow Jones
Assuming the 90 days horizon Smead Funds is expected to generate 1.19 times less return on investment than Dow Jones. In addition to that, Smead Funds is 1.61 times more volatile than Dow Jones Industrial. It trades about 0.04 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 3,410,864 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 1,080,201 from holding Dow Jones Industrial or generate 31.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smead Funds Trust vs. Dow Jones Industrial
Performance |
| Timeline |
Smead Funds and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Smead Funds Trust
Pair trading matchups for Smead Funds
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Smead Funds and Dow Jones
The main advantage of trading using opposite Smead Funds and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smead Funds 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.| Smead Funds vs. Oakmark International Fund | Smead Funds vs. Dodge International Stock | Smead Funds vs. Oakmark International Fund | Smead Funds vs. Oakmark International Fund |
| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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