Correlation Between Dow Jones and Dreyfus Midcap
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Dreyfus Midcap 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 Dreyfus Midcap 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 Dreyfus Midcap Index, you can compare the effects of market volatilities on Dow Jones and Dreyfus Midcap 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 Dreyfus Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Dreyfus Midcap.
Diversification Opportunities for Dow Jones and Dreyfus Midcap
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and Dreyfus is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Dreyfus Midcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Midcap Index 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 Dreyfus Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Midcap Index has no effect on the direction of Dow Jones i.e., Dow Jones and Dreyfus Midcap go up and down completely randomly.
Pair Corralation between Dow Jones and Dreyfus Midcap
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.6 times more return on investment than Dreyfus Midcap. However, Dow Jones Industrial is 1.66 times less risky than Dreyfus Midcap. It trades about 0.1 of its potential returns per unit of risk. Dreyfus Midcap Index is currently generating about 0.02 per unit of risk. If you would invest 3,181,914 in Dow Jones Industrial on December 1, 2024 and sell it today you would earn a total of 1,202,177 from holding Dow Jones Industrial or generate 37.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. Dreyfus Midcap Index
Performance |
| Timeline |
Dow Jones and Dreyfus Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Dreyfus Midcap Index
Pair trading matchups for Dreyfus Midcap
Pair Trading with Dow Jones and Dreyfus Midcap
The main advantage of trading using opposite Dow Jones and Dreyfus Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Dreyfus Midcap 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 Dreyfus Midcap will offset losses from the drop in Dreyfus Midcap's long position.| Dow Jones vs. Cannae Holdings | Dow Jones vs. Fidus Investment Corp | Dow Jones vs. SEI Investments | Dow Jones vs. Cracker Barrel Old |
| Dreyfus Midcap vs. Dreyfus Smallcap Stock | Dreyfus Midcap vs. Bny Mellon Emerging | Dreyfus Midcap vs. Champlain Mid Cap |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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