Correlation Between Capital BofA and Dow Jones
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By analyzing existing cross correlation between Capital BofA Merrill and Dow Jones Industrial, you can compare the effects of market volatilities on Capital BofA 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 Capital BofA with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital BofA and Dow Jones.
Diversification Opportunities for Capital BofA and Dow Jones
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Capital and Dow is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Capital BofA Merrill 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 Capital BofA 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 Capital BofA Merrill 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 Capital BofA i.e., Capital BofA and Dow Jones go up and down completely randomly.
Pair Corralation between Capital BofA and Dow Jones
Assuming the 90 days trading horizon Capital BofA is expected to generate 6.08 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Capital BofA Merrill is 1.33 times less risky than Dow Jones. It trades about 0.03 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,179,460 in Dow Jones Industrial on November 2, 2024 and sell it today you would earn a total of 308,753 from holding Dow Jones Industrial or generate 7.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.08% |
| Values | Daily Returns |
Capital BofA Merrill vs. Dow Jones Industrial
Performance |
| Timeline |
Capital BofA and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Capital BofA and Dow Jones
The main advantage of trading using opposite Capital BofA and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital BofA 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 Capital BofA Merrill 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.| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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