Correlation Between Dow Jones and Aggressive Growth
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Aggressive Growth 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 Aggressive Growth 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 Aggressive Growth Fund, you can compare the effects of market volatilities on Dow Jones and Aggressive Growth 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 Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Aggressive Growth.
Diversification Opportunities for Dow Jones and Aggressive Growth
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Aggressive is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Aggressive Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth 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 Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Dow Jones i.e., Dow Jones and Aggressive Growth go up and down completely randomly.
Pair Corralation between Dow Jones and Aggressive Growth
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.51 times less return on investment than Aggressive Growth. But when comparing it to its historical volatility, Dow Jones Industrial is 1.64 times less risky than Aggressive Growth. It trades about 0.09 of its potential returns per unit of risk. Aggressive Growth Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,913 in Aggressive Growth Fund on September 24, 2024 and sell it today you would earn a total of 1,023 from holding Aggressive Growth Fund or generate 17.3% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Dow Jones Industrial vs. Aggressive Growth Fund
Performance |
Timeline |
Dow Jones and Aggressive Growth Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Aggressive Growth Fund
Pair trading matchups for Aggressive Growth
Pair Trading with Dow Jones and Aggressive Growth
The main advantage of trading using opposite Dow Jones and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Aggressive Growth 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 Aggressive Growth will offset losses from the drop in Aggressive Growth's long position.Dow Jones vs. Teleflex Incorporated | Dow Jones vs. Sonida Senior Living | Dow Jones vs. Avadel Pharmaceuticals PLC | Dow Jones vs. Cardinal Health |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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