Correlation Between Dow Jones and Columbia
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Columbia 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 Columbia 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 Columbia Government Mortgage, you can compare the effects of market volatilities on Dow Jones and Columbia 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 Columbia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Columbia.
Diversification Opportunities for Dow Jones and Columbia
Very weak diversification
The 3 months correlation between Dow and Columbia is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Columbia Government Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Government 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 Columbia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Government has no effect on the direction of Dow Jones i.e., Dow Jones and Columbia go up and down completely randomly.
Pair Corralation between Dow Jones and Columbia
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.28 times more return on investment than Columbia. However, Dow Jones is 1.28 times more volatile than Columbia Government Mortgage. It trades about 0.09 of its potential returns per unit of risk. Columbia Government Mortgage is currently generating about 0.03 per unit of risk. If you would invest 3,312,959 in Dow Jones Industrial on November 9, 2024 and sell it today you would earn a total of 1,161,804 from holding Dow Jones Industrial or generate 35.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. Columbia Government Mortgage
Performance |
| Timeline |
Dow Jones and Columbia Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Columbia Government Mortgage
Pair trading matchups for Columbia
Pair Trading with Dow Jones and Columbia
The main advantage of trading using opposite Dow Jones and Columbia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Columbia 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 Columbia will offset losses from the drop in Columbia's long position.| Dow Jones vs. Douglas Emmett | Dow Jones vs. Todos Medical | Dow Jones vs. Eastern Co | Dow Jones vs. Merit Medical Systems |
| Columbia vs. Gmo High Yield | Columbia vs. Litman Gregory Masters | Columbia vs. Pace High Yield | Columbia vs. Intal High Relative |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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