Correlation Between Dow Jones and Federated Government
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Federated Government 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 Federated Government 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 Federated Government Income, you can compare the effects of market volatilities on Dow Jones and Federated Government 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 Federated Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Federated Government.
Diversification Opportunities for Dow Jones and Federated Government
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Federated is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Federated Government Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Government 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 Federated Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Government has no effect on the direction of Dow Jones i.e., Dow Jones and Federated Government go up and down completely randomly.
Pair Corralation between Dow Jones and Federated Government
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.29 times more return on investment than Federated Government. However, Dow Jones is 2.29 times more volatile than Federated Government Income. It trades about 0.12 of its potential returns per unit of risk. Federated Government Income is currently generating about -0.06 per unit of risk. If you would invest 4,093,693 in Dow Jones Industrial on November 2, 2024 and sell it today you would earn a total of 394,520 from holding Dow Jones Industrial or generate 9.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.04% |
| Values | Daily Returns |
Dow Jones Industrial vs. Federated Government Income
Performance |
| Timeline |
Dow Jones and Federated Government Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Federated Government Income
Pair trading matchups for Federated Government
Pair Trading with Dow Jones and Federated Government
The main advantage of trading using opposite Dow Jones and Federated Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Federated Government 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 Federated Government will offset losses from the drop in Federated Government's long position.| Dow Jones vs. Boston Properties | Dow Jones vs. Suntory Beverage Food | Dow Jones vs. Envista Holdings Corp | Dow Jones vs. Fevertree Drinks Plc |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |