Correlation Between Managed Volatility and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Managed Volatility 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 Managed Volatility and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Managed Volatility Fund and Dow Jones Industrial, you can compare the effects of market volatilities on Managed Volatility 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 Managed Volatility with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Managed Volatility and Dow Jones.
Diversification Opportunities for Managed Volatility and Dow Jones
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Managed and Dow is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Managed Volatility Fund 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 Managed Volatility 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 Managed Volatility Fund 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 Managed Volatility i.e., Managed Volatility and Dow Jones go up and down completely randomly.
Pair Corralation between Managed Volatility and Dow Jones
Assuming the 90 days horizon Managed Volatility is expected to generate 31.25 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Managed Volatility Fund is 35.66 times less risky than Dow Jones. It trades about 0.31 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Managed Volatility Fund vs. Dow Jones Industrial
Performance |
| Timeline |
Managed Volatility and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Managed Volatility Fund
Pair trading matchups for Managed Volatility
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Managed Volatility and Dow Jones
The main advantage of trading using opposite Managed Volatility and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Managed Volatility 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.| Managed Volatility vs. Lifestyle Ii Moderate | Managed Volatility vs. Dimensional Retirement Income | Managed Volatility vs. Qs Moderate Growth | Managed Volatility vs. Hartford Moderate Allocation |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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