Correlation Between DOW and Janus Henderson

By analyzing existing cross correlation between DOW and Janus Henderson Overseas, you can compare the effects of market volatilities on DOW and Janus Henderson 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 with a short position of Janus Henderson. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOW and Janus Henderson.

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

Diversification Opportunities for DOW and Janus Henderson

0.41
  Correlation Coefficient
DOW
Janus Henderson Overseas

Very weak diversification

The 3 months correlation between DOW and Janus is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding DOW and Janus Henderson Overseas in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Janus Henderson Overseas and DOW 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 are associated (or correlated) with Janus Henderson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janus Henderson Overseas has no effect on the direction of DOW i.e., DOW and Janus Henderson go up and down completely randomly.
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Pair Corralation between DOW and Janus Henderson

Given the investment horizon of 90 days DOW is expected to generate 1.18 times less return on investment than Janus Henderson. In addition to that, DOW is 1.14 times more volatile than Janus Henderson Overseas. It trades about 0.04 of its total potential returns per unit of risk. Janus Henderson Overseas is currently generating about 0.05 per unit of volatility. If you would invest  3,179  in Janus Henderson Overseas on July 25, 2021 and sell it today you would earn a total of  1,279  from holding Janus Henderson Overseas or generate 40.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

DOW  vs.  Janus Henderson Overseas

 Performance (%) 
      Timeline 

DOW and Janus Henderson Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Plantfuel Life vs. DOW
Mountain Valley vs. DOW
CORUS ENTERTAINMENT vs. DOW
Sentinelone Inc vs. DOW
Total SE vs. DOW
Visa vs. DOW
Union Pacific vs. DOW
Ford vs. DOW
BRAGG GAMING vs. DOW
Salesforce vs. DOW
Citigroup vs. DOW
Alphabet vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.

Janus Henderson Overseas

Pair trading matchups for Janus Henderson

Pair Trading with DOW and Janus Henderson

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

DOW

Pair trading matchups for DOW

Alphabet vs. DOW
BRAGG GAMING vs. DOW
ALGONQUIN POWER vs. DOW
ANDREW PELLER vs. DOW
BIRCHCLIFF ENERGY vs. DOW
Total SE vs. DOW
Visa vs. DOW
Sentinelone Inc vs. DOW
Mountain Valley vs. DOW
Ford vs. DOW
Plantfuel Life vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.
The idea behind DOW and Janus Henderson Overseas 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.

Janus Henderson Overseas

Pair trading matchups for Janus Henderson

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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