Correlation Between Dow Jones and AeroVironment
Can any of the company-specific risk be diversified away by investing in both Dow Jones and AeroVironment 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 AeroVironment 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 AeroVironment, you can compare the effects of market volatilities on Dow Jones and AeroVironment 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 AeroVironment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and AeroVironment.
Diversification Opportunities for Dow Jones and AeroVironment
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and AeroVironment is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment 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 AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of Dow Jones i.e., Dow Jones and AeroVironment go up and down completely randomly.
Pair Corralation between Dow Jones and AeroVironment
Assuming the 90 days trading horizon Dow Jones is expected to generate 6.65 times less return on investment than AeroVironment. But when comparing it to its historical volatility, Dow Jones Industrial is 4.81 times less risky than AeroVironment. It trades about 0.1 of its potential returns per unit of risk. AeroVironment is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 27,218 in AeroVironment on July 20, 2025 and sell it today you would earn a total of 7,841 from holding AeroVironment or generate 28.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. AeroVironment
Performance |
| Timeline |
Dow Jones and AeroVironment Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
AeroVironment
Pair trading matchups for AeroVironment
Pair Trading with Dow Jones and AeroVironment
The main advantage of trading using opposite Dow Jones and AeroVironment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, AeroVironment 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 AeroVironment will offset losses from the drop in AeroVironment's long position.| Dow Jones vs. Wizz Air Holdings | Dow Jones vs. Orion Office Reit | Dow Jones vs. Sinclair Broadcast Group | Dow Jones vs. Ryanair Holdings PLC |
| AeroVironment vs. Curtiss Wright | AeroVironment vs. BWX Technologies | AeroVironment vs. Elbit Systems | AeroVironment vs. Kratos Defense Security |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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