Correlation Between Income Growth and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Income Growth and Dow Jones 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 Income Growth and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Growth Fund and Dow Jones Industrial, you can compare the effects of market volatilities on Income Growth and Dow Jones 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 Income Growth with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Growth and Dow Jones.
Diversification Opportunities for Income Growth and Dow Jones
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Income and Dow is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Income Growth Fund and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Income Growth 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 Income Growth Fund are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Income Growth i.e., Income Growth and Dow Jones go up and down completely randomly.
Pair Corralation between Income Growth and Dow Jones
Assuming the 90 days horizon Income Growth is expected to generate 2.6 times less return on investment than Dow Jones. In addition to that, Income Growth is 1.06 times more volatile than Dow Jones Industrial. It trades about 0.05 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.13 per unit of volatility. If you would invest 4,398,899 in Dow Jones Industrial on September 9, 2024 and sell it today you would earn a total of 65,353 from holding Dow Jones Industrial or generate 1.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Income Growth Fund vs. Dow Jones Industrial
Performance |
Timeline |
Income Growth and Dow Jones Volatility Contrast
Predicted Return Density |
Returns |
Income Growth Fund
Pair trading matchups for Income Growth
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Income Growth and Dow Jones
The main advantage of trading using opposite Income Growth and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Growth position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.Income Growth vs. Siit Ultra Short | Income Growth vs. Artisan Emerging Markets | Income Growth vs. Legg Mason Western | Income Growth vs. T Rowe Price |
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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 Stocks Directory module to find actively traded stocks across global markets.
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