Correlation Between Dow Jones and Hartford Multifactor
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Hartford Multifactor 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 Multifactor 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 Multifactor Small, you can compare the effects of market volatilities on Dow Jones and Hartford Multifactor 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 Multifactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Hartford Multifactor.
Diversification Opportunities for Dow Jones and Hartford Multifactor
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Hartford is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Hartford Multifactor Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Multifactor 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 Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Multifactor has no effect on the direction of Dow Jones i.e., Dow Jones and Hartford Multifactor go up and down completely randomly.
Pair Corralation between Dow Jones and Hartford Multifactor
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.61 times more return on investment than Hartford Multifactor. However, Dow Jones Industrial is 1.65 times less risky than Hartford Multifactor. It trades about 0.08 of its potential returns per unit of risk. Hartford Multifactor Small is currently generating about 0.04 per unit of risk. If you would invest 3,304,456 in Dow Jones Industrial on October 10, 2024 and sell it today you would earn a total of 948,380 from holding Dow Jones Industrial or generate 28.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 99.8% |
Values | Daily Returns |
Dow Jones Industrial vs. Hartford Multifactor Small
Performance |
Timeline |
Dow Jones and Hartford Multifactor Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Hartford Multifactor Small
Pair trading matchups for Hartford Multifactor
Pair Trading with Dow Jones and Hartford Multifactor
The main advantage of trading using opposite Dow Jones and Hartford Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Hartford Multifactor 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 Multifactor will offset losses from the drop in Hartford Multifactor's long position.Dow Jones vs. Thai Beverage PCL | Dow Jones vs. ServiceNow | Dow Jones vs. Loud Beverage Group | Dow Jones vs. Suntory Beverage Food |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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