Correlation Between Dow Jones and Aims Property

Can any of the company-specific risk be diversified away by investing in both Dow Jones and Aims Property 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 Dow Jones and Aims Property into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dow Jones Industrial and Aims Property Securities, you can compare the effects of market volatilities on Dow Jones and Aims Property 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 Dow Jones with a short position of Aims Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Aims Property.

Diversification Opportunities for Dow Jones and Aims Property

-0.06

Correlation Coefficient

Dow Jones  Aims Property

Good diversification

The 3 months correlation between Dow and Aims is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Aims Property Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aims Property Securities and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Aims Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aims Property Securities has no effect on the direction of Dow Jones i.e., Dow Jones and Aims Property go up and down completely randomly.

Pair Corralation between Dow Jones and Aims Property

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Aims Property. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 1.06 times less risky than Aims Property. The index trades about -0.28 of its potential returns per unit of risk. The Aims Property Securities is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  170.00  in Aims Property Securities on September 29, 2024 and sell it today you would lose (1.00) from holding Aims Property Securities or give up 0.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Dow Jones Industrial  vs.  Aims Property Securities

Pair Trading with Dow Jones and Aims Property

The main advantage of trading using opposite Dow Jones and Aims Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Aims Property 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 Aims Property will offset losses from the drop in Aims Property's long position.

The idea behind Dow Jones Industrial and Aims Property Securities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.