Correlation Between Dow Jones and Americafirst Tactical

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

Diversification Opportunities for Dow Jones and Americafirst Tactical

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Dow and Americafirst is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Americafirst Tactical Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americafirst Tactical 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 Americafirst Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americafirst Tactical has no effect on the direction of Dow Jones i.e., Dow Jones and Americafirst Tactical go up and down completely randomly.
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Pair Corralation between Dow Jones and Americafirst Tactical

Assuming the 90 days trading horizon Dow Jones is expected to generate 5.0 times less return on investment than Americafirst Tactical. But when comparing it to its historical volatility, Dow Jones Industrial is 1.64 times less risky than Americafirst Tactical. It trades about 0.04 of its potential returns per unit of risk. Americafirst Tactical Alpha is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,629  in Americafirst Tactical Alpha on September 23, 2024 and sell it today you would earn a total of  151.00  from holding Americafirst Tactical Alpha or generate 9.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Dow Jones Industrial  vs.  Americafirst Tactical Alpha

 Performance 
       Timeline  

Dow Jones and Americafirst Tactical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dow Jones and Americafirst Tactical

The main advantage of trading using opposite Dow Jones and Americafirst Tactical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Americafirst Tactical 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 Americafirst Tactical will offset losses from the drop in Americafirst Tactical's long position.
The idea behind Dow Jones Industrial and Americafirst Tactical Alpha 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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