Correlation Between Dividend and Dividend Growth

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Dividend and Dividend Growth 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 Dividend and Dividend Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dividend 15 Split and Dividend Growth Split, you can compare the effects of market volatilities on Dividend and Dividend Growth 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 Dividend with a short position of Dividend Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend and Dividend Growth.

Diversification Opportunities for Dividend and Dividend Growth

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between Dividend and Dividend is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dividend 15 Split and Dividend Growth Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dividend Growth Split and Dividend 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 Dividend 15 Split are associated (or correlated) with Dividend Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dividend Growth Split has no effect on the direction of Dividend i.e., Dividend and Dividend Growth go up and down completely randomly.

Pair Corralation between Dividend and Dividend Growth

Assuming the 90 days horizon Dividend 15 Split is expected to generate 1.57 times more return on investment than Dividend Growth. However, Dividend is 1.57 times more volatile than Dividend Growth Split. It trades about 0.48 of its potential returns per unit of risk. Dividend Growth Split is currently generating about 0.55 per unit of risk. If you would invest  486.00  in Dividend 15 Split on April 20, 2025 and sell it today you would earn a total of  149.00  from holding Dividend 15 Split or generate 30.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Dividend 15 Split  vs.  Dividend Growth Split

 Performance 
       Timeline  
Dividend 15 Split 

Risk-Adjusted Performance

Very Strong

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Dividend 15 Split are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dividend displayed solid returns over the last few months and may actually be approaching a breakup point.
Dividend Growth Split 

Risk-Adjusted Performance

Excellent

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Dividend Growth Split are ranked lower than 43 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dividend Growth displayed solid returns over the last few months and may actually be approaching a breakup point.

Dividend and Dividend Growth Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dividend and Dividend Growth

The main advantage of trading using opposite Dividend and Dividend Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dividend position performs unexpectedly, Dividend Growth 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 Dividend Growth will offset losses from the drop in Dividend Growth's long position.
The idea behind Dividend 15 Split and Dividend Growth Split 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

Other Complementary Tools

Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities