Correlation Between Dow Jones and Hartford Schroders

Can any of the company-specific risk be diversified away by investing in both Dow Jones and Hartford Schroders 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 Hartford Schroders 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 Hartford Schroders Emerging, you can compare the effects of market volatilities on Dow Jones and Hartford Schroders 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 Hartford Schroders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Hartford Schroders.

Diversification Opportunities for Dow Jones and Hartford Schroders

-0.57

Correlation Coefficient

Dow Jones  Hartford Schroders

Excellent diversification

The 3 months correlation between Dow and Hartford is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Hartford Schroders Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Schroders 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 Hartford Schroders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Schroders has no effect on the direction of Dow Jones i.e., Dow Jones and Hartford Schroders go up and down completely randomly.

Pair Corralation between Dow Jones and Hartford Schroders

Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.8 times more return on investment than Hartford Schroders. However, Dow Jones Industrial is 1.26 times less risky than Hartford Schroders. It trades about 0.09 of its potential returns per unit of risk. Hartford Schroders Emerging is currently generating about -0.01 per unit of risk. If you would invest  3,916,952  in Dow Jones Industrial on September 29, 2024 and sell it today you would earn a total of  382,269  from holding Dow Jones Industrial or generate 9.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Dow Jones Industrial  vs.  Hartford Schroders Emerging

Pair Trading with Dow Jones and Hartford Schroders

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

The idea behind Dow Jones Industrial and Hartford Schroders Emerging 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.