Correlation Between Dow Jones and Fidelity Equity

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Fidelity Equity 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 Fidelity Equity 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 Fidelity Equity Premium, you can compare the effects of market volatilities on Dow Jones and Fidelity Equity 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 Fidelity Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Fidelity Equity.

Diversification Opportunities for Dow Jones and Fidelity Equity

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Dow and Fidelity is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Fidelity Equity Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Equity Premium 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 Fidelity Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Equity Premium has no effect on the direction of Dow Jones i.e., Dow Jones and Fidelity Equity go up and down completely randomly.
    Optimize

Pair Corralation between Dow Jones and Fidelity Equity

Assuming the 90 days trading horizon Dow Jones is expected to generate 8.81 times less return on investment than Fidelity Equity. But when comparing it to its historical volatility, Dow Jones Industrial is 7.36 times less risky than Fidelity Equity. It trades about 0.15 of its potential returns per unit of risk. Fidelity Equity Premium is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,861  in Fidelity Equity Premium on August 29, 2024 and sell it today you would earn a total of  866.00  from holding Fidelity Equity Premium or generate 46.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy33.33%
ValuesDaily Returns

Dow Jones Industrial  vs.  Fidelity Equity Premium

 Performance 
       Timeline  

Dow Jones and Fidelity Equity Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dow Jones and Fidelity Equity

The main advantage of trading using opposite Dow Jones and Fidelity Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Fidelity Equity 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 Fidelity Equity will offset losses from the drop in Fidelity Equity's long position.
The idea behind Dow Jones Industrial and Fidelity Equity Premium pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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.

Other Complementary Tools

Share Portfolio
Track or share privately all of your investments from the convenience of any device
Fundamental Analysis
View fundamental data based on most recent published financial statements
Portfolio File Import
Quickly import all of your third-party portfolios from your local drive in csv format
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance