Correlation Between Thompson Largecap and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Thompson Largecap 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 Thompson Largecap and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thompson Largecap Fund and Dow Jones Industrial, you can compare the effects of market volatilities on Thompson Largecap 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 Thompson Largecap with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thompson Largecap and Dow Jones.
Diversification Opportunities for Thompson Largecap and Dow Jones
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Thompson and Dow is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Thompson Largecap 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 Thompson Largecap 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 Thompson Largecap 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 Thompson Largecap i.e., Thompson Largecap and Dow Jones go up and down completely randomly.
Pair Corralation between Thompson Largecap and Dow Jones
Assuming the 90 days horizon Thompson Largecap Fund is expected to generate about the same return on investment as Dow Jones Industrial. But, Thompson Largecap Fund is 1.1 times less risky than Dow Jones. It trades about 0.27 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.24 per unit of risk. If you would invest 4,211,440 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 218,211 from holding Dow Jones Industrial or generate 5.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thompson Largecap Fund vs. Dow Jones Industrial
Performance |
| Timeline |
Thompson Largecap and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Thompson Largecap Fund
Pair trading matchups for Thompson Largecap
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Thompson Largecap and Dow Jones
The main advantage of trading using opposite Thompson Largecap and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thompson Largecap 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.| Thompson Largecap vs. Clipper Fund Inc | Thompson Largecap vs. Meridian Trarian Fund | Thompson Largecap vs. Meridian Growth Fund | Thompson Largecap vs. Muhlenkamp Fund Institutional |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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