Correlation Between Growth Income and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Growth Income 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 Growth Income and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Income Fund and Dow Jones Industrial, you can compare the effects of market volatilities on Growth Income 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 Growth Income with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Income and Dow Jones.
Diversification Opportunities for Growth Income and Dow Jones
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and Dow is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Growth Income 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 Growth Income 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 Growth Income 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 Growth Income i.e., Growth Income and Dow Jones go up and down completely randomly.
Pair Corralation between Growth Income and Dow Jones
Assuming the 90 days horizon Growth Income Fund is expected to generate 1.28 times more return on investment than Dow Jones. However, Growth Income is 1.28 times more volatile than Dow Jones Industrial. It trades about 0.08 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 2,081 in Growth Income Fund on August 30, 2024 and sell it today you would earn a total of 825.00 from holding Growth Income Fund or generate 39.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Income Fund vs. Dow Jones Industrial
Performance |
| Timeline |
Growth Income and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Growth Income Fund
Pair trading matchups for Growth Income
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Growth Income and Dow Jones
The main advantage of trading using opposite Growth Income and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Income 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.| Growth Income vs. Queens Road Small | Growth Income vs. Mid Cap Value Profund | Growth Income vs. Great West Loomis Sayles | Growth Income vs. Vanguard Small Cap Value |
| 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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