Correlation Between TSEP and Dow Jones
Can any of the company-specific risk be diversified away by investing in both TSEP 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 TSEP and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TSEP and Dow Jones Industrial, you can compare the effects of market volatilities on TSEP 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 TSEP with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of TSEP and Dow Jones.
Diversification Opportunities for TSEP and Dow Jones
Good diversification
The 3 months correlation between TSEP and Dow is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding TSEP 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 TSEP 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 TSEP 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 TSEP i.e., TSEP and Dow Jones go up and down completely randomly.
Pair Corralation between TSEP and Dow Jones
Given the investment horizon of 90 days TSEP is expected to under-perform the Dow Jones. But the etf apears to be less risky and, when comparing its historical volatility, TSEP is 1.63 times less risky than Dow Jones. The etf trades about -0.11 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 4,179,460 in Dow Jones Industrial on September 5, 2024 and sell it today you would earn a total of 321,944 from holding Dow Jones Industrial or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TSEP vs. Dow Jones Industrial
Performance |
| Timeline |
TSEP and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
TSEP
Pair trading matchups for TSEP
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with TSEP and Dow Jones
The main advantage of trading using opposite TSEP and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TSEP 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.| TSEP vs. First Trust Dorsey | TSEP vs. Direxion Daily MSCI | TSEP vs. MFUT | TSEP vs. VanEck Morningstar Wide |
| Dow Jones vs. Shake Shack | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. Dave Busters Entertainment | Dow Jones vs. Meli Hotels International |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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