Correlation Between Dow Jones and WHG FINVEST

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

Diversification Opportunities for Dow Jones and WHG FINVEST

0.44

Correlation Coefficient

Dow Jones  WHG FINVEST

Very weak diversification

The 3 months correlation between Dow and WHG is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and WHG FINVEST SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WHG FINVEST SP 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 WHG FINVEST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WHG FINVEST SP has no effect on the direction of Dow Jones i.e., Dow Jones and WHG FINVEST go up and down completely randomly.

Pair Corralation between Dow Jones and WHG FINVEST

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the WHG FINVEST. In addition to that, Dow Jones is 22.54 times more volatile than WHG FINVEST SP. It trades about -0.21 of its total potential returns per unit of risk. WHG FINVEST SP is currently generating about 0.24 per unit of volatility. If you would invest  123,612  in WHG FINVEST SP on October 12, 2024 and sell it today you would earn a total of  178.00  from holding WHG FINVEST SP or generate 0.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.71%
Values	Daily Returns

Dow Jones Industrial  vs.  WHG FINVEST SP

Pair Trading with Dow Jones and WHG FINVEST

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

The idea behind Dow Jones Industrial and WHG FINVEST SP 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .