Correlation Between Arlington Asset and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Arlington Asset 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 Arlington Asset and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arlington Asset Investment and Dow Jones Industrial, you can compare the effects of market volatilities on Arlington Asset 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 Arlington Asset with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arlington Asset and Dow Jones.
Diversification Opportunities for Arlington Asset and Dow Jones
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arlington and Dow is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Arlington Asset Investment 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 Arlington Asset 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 Arlington Asset Investment 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 Arlington Asset i.e., Arlington Asset and Dow Jones go up and down completely randomly.
Pair Corralation between Arlington Asset and Dow Jones
Given the investment horizon of 90 days Arlington Asset Investment is expected to generate 5.82 times more return on investment than Dow Jones. However, Arlington Asset is 5.82 times more volatile than Dow Jones Industrial. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.09 per unit of risk. If you would invest 294.00 in Arlington Asset Investment on September 6, 2024 and sell it today you would earn a total of 175.00 from holding Arlington Asset Investment or generate 59.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 30.3% |
Values | Daily Returns |
Arlington Asset Investment vs. Dow Jones Industrial
Performance |
Timeline |
Arlington Asset and Dow Jones Volatility Contrast
Predicted Return Density |
Returns |
Arlington Asset Investment
Pair trading matchups for Arlington Asset
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Arlington Asset and Dow Jones
The main advantage of trading using opposite Arlington Asset and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arlington Asset 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.Arlington Asset vs. ACRES Commercial Realty | Arlington Asset vs. ACRES Commercial Realty | Arlington Asset vs. Cherry Hill Mortgage | Arlington Asset vs. Nexpoint Real Estate |
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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