Correlation Between Dow Jones and City National
Can any of the company-specific risk be diversified away by investing in both Dow Jones and City National 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 City National 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 City National Rochdale, you can compare the effects of market volatilities on Dow Jones and City National 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 City National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and City National.
Diversification Opportunities for Dow Jones and City National
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dow and City is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and City National Rochdale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City National Rochdale 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 City National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City National Rochdale has no effect on the direction of Dow Jones i.e., Dow Jones and City National go up and down completely randomly.
Pair Corralation between Dow Jones and City National
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 5.8 times more return on investment than City National. However, Dow Jones is 5.8 times more volatile than City National Rochdale. It trades about 0.14 of its potential returns per unit of risk. City National Rochdale is currently generating about 0.12 per unit of risk. If you would invest 3,373,930 in Dow Jones Industrial on September 4, 2024 and sell it today you would earn a total of 1,104,270 from holding Dow Jones Industrial or generate 32.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.66% |
| Values | Daily Returns |
Dow Jones Industrial vs. City National Rochdale
Performance |
| Timeline |
Dow Jones and City National Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
City National Rochdale
Pair trading matchups for City National
Pair Trading with Dow Jones and City National
The main advantage of trading using opposite Dow Jones and City National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, City National 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 City National will offset losses from the drop in City National's long position.| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
| City National vs. Vanguard Total Stock | City National vs. Vanguard 500 Index | City National vs. Vanguard Total Stock | City National vs. Vanguard Total Stock |
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.
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