Correlation Between Dow Jones and California Intermediate-ter
Can any of the company-specific risk be diversified away by investing in both Dow Jones and California Intermediate-ter 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 California Intermediate-ter 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 California Intermediate Term Tax Free, you can compare the effects of market volatilities on Dow Jones and California Intermediate-ter 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 California Intermediate-ter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and California Intermediate-ter.
Diversification Opportunities for Dow Jones and California Intermediate-ter
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and California is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and California Intermediate Term T in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Intermediate-ter 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 California Intermediate-ter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Intermediate-ter has no effect on the direction of Dow Jones i.e., Dow Jones and California Intermediate-ter go up and down completely randomly.
Pair Corralation between Dow Jones and California Intermediate-ter
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 4.72 times more return on investment than California Intermediate-ter. However, Dow Jones is 4.72 times more volatile than California Intermediate Term Tax Free. It trades about 0.19 of its potential returns per unit of risk. California Intermediate Term Tax Free is currently generating about 0.0 per unit of risk. If you would invest 4,329,703 in Dow Jones Industrial on October 25, 2024 and sell it today you would earn a total of 126,804 from holding Dow Jones Industrial or generate 2.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. California Intermediate Term T
Performance |
| Timeline |
Dow Jones and California Intermediate-ter Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
California Intermediate Term Tax Free
Pair trading matchups for California Intermediate-ter
Pair Trading with Dow Jones and California Intermediate-ter
The main advantage of trading using opposite Dow Jones and California Intermediate-ter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, California Intermediate-ter 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 California Intermediate-ter will offset losses from the drop in California Intermediate-ter's long position.| Dow Jones vs. Xiabuxiabu Catering Management | Dow Jones vs. Neogen | Dow Jones vs. Orion Office Reit | Dow Jones vs. Bassett Furniture Industries |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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