Correlation Between United States and Dow Jones
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Copper and Dow Jones Industrial, you can compare the effects of market volatilities on United States 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 United States with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Dow Jones.
Diversification Opportunities for United States and Dow Jones
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between United and Dow is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding United States Copper 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 United States 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 United States Copper 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 United States i.e., United States and Dow Jones go up and down completely randomly.
Pair Corralation between United States and Dow Jones
Given the investment horizon of 90 days United States Copper is expected to under-perform the Dow Jones. In addition to that, United States is 1.84 times more volatile than Dow Jones Industrial. It trades about -0.16 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of volatility. 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 Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Copper vs. Dow Jones Industrial
Performance |
| Timeline |
United States and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
United States Copper
Pair trading matchups for United States
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with United States and Dow Jones
The main advantage of trading using opposite United States and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Aquagold International | United States vs. Morningstar Unconstrained Allocation | United States vs. High Yield Municipal Fund | United States vs. Thrivent High Yield |
| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |