Correlation Between Dow Jones and Capital Management
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Capital Management 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 Capital Management 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 Capital Management Mid Cap, you can compare the effects of market volatilities on Dow Jones and Capital Management 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 Capital Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Capital Management.
Diversification Opportunities for Dow Jones and Capital Management
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Capital is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Capital Management Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Management Mid 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 Capital Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Management Mid has no effect on the direction of Dow Jones i.e., Dow Jones and Capital Management go up and down completely randomly.
Pair Corralation between Dow Jones and Capital Management
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.86 times more return on investment than Capital Management. However, Dow Jones Industrial is 1.16 times less risky than Capital Management. It trades about 0.08 of its potential returns per unit of risk. Capital Management Mid Cap is currently generating about 0.06 per unit of risk. If you would invest 3,400,504 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 1,090,561 from holding Dow Jones Industrial or generate 32.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 76.57% |
| Values | Daily Returns |
Dow Jones Industrial vs. Capital Management Mid Cap
Performance |
| Timeline |
Dow Jones and Capital Management Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Capital Management Mid Cap
Pair trading matchups for Capital Management
Pair Trading with Dow Jones and Capital Management
The main advantage of trading using opposite Dow Jones and Capital Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Capital Management 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 Capital Management will offset losses from the drop in Capital Management's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Capital Management vs. Calvert Developed Market | Capital Management vs. Calvert Short Duration | Capital Management vs. Calvert Short Duration | Capital Management vs. Calvert Short Duration |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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