Correlation Between Dow Jones and The Arbitrage
Can any of the company-specific risk be diversified away by investing in both Dow Jones and The Arbitrage 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 The Arbitrage 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 The Arbitrage Credit, you can compare the effects of market volatilities on Dow Jones and The Arbitrage 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 The Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and The Arbitrage.
Diversification Opportunities for Dow Jones and The Arbitrage
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and The is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and The Arbitrage Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Credit 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 The Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Credit has no effect on the direction of Dow Jones i.e., Dow Jones and The Arbitrage go up and down completely randomly.
Pair Corralation between Dow Jones and The Arbitrage
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the The Arbitrage. In addition to that, Dow Jones is 9.55 times more volatile than The Arbitrage Credit. It trades about -0.22 of its total potential returns per unit of risk. The Arbitrage Credit is currently generating about 0.16 per unit of volatility. If you would invest 981.00 in The Arbitrage Credit on November 27, 2024 and sell it today you would earn a total of 2.00 from holding The Arbitrage Credit or generate 0.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. The Arbitrage Credit
Performance |
| Timeline |
Dow Jones and The Arbitrage Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
The Arbitrage Credit
Pair trading matchups for The Arbitrage
Pair Trading with Dow Jones and The Arbitrage
The main advantage of trading using opposite Dow Jones and The Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, The Arbitrage 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 The Arbitrage will offset losses from the drop in The Arbitrage's long position.The idea behind Dow Jones Industrial and The Arbitrage Credit 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.| The Arbitrage vs. The Arbitrage Fund | The Arbitrage vs. The Arbitrage Event Driven | The Arbitrage vs. The Arbitrage Fund | The Arbitrage vs. The Arbitrage Event Driven |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |