Correlation Between Ladenburg Income and Dow Jones

Can any of the company-specific risk be diversified away by investing in both Ladenburg Income 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 Ladenburg Income and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ladenburg Income Fundclass and Dow Jones Industrial, you can compare the effects of market volatilities on Ladenburg Income 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 Ladenburg Income with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ladenburg Income and Dow Jones.

Diversification Opportunities for Ladenburg Income and Dow Jones

0.18

Correlation Coefficient

Ladenburg Income  Dow Jones

Average diversification

The 3 months correlation between Ladenburg and Dow is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ladenburg Income Fundclass 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 Ladenburg Income 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 Ladenburg Income Fundclass 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 Ladenburg Income i.e., Ladenburg Income and Dow Jones go up and down completely randomly.

Pair Corralation between Ladenburg Income and Dow Jones

Assuming the 90 days horizon Ladenburg Income Fundclass is expected to under-perform the Dow Jones. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ladenburg Income Fundclass is 2.36 times less risky than Dow Jones. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,160,618  in Dow Jones Industrial on September 17, 2024 and sell it today you would earn a total of  222,188  from holding Dow Jones Industrial or generate 5.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ladenburg Income Fundclass  vs.  Dow Jones Industrial

Pair Trading with Ladenburg Income and Dow Jones

The main advantage of trading using opposite Ladenburg Income and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ladenburg Income 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.

The idea behind Ladenburg Income Fundclass and Dow Jones Industrial 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.