Correlation Between Dow Jones and Fidelity Investment
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Fidelity Investment 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 Investment 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 Investment Grade, you can compare the effects of market volatilities on Dow Jones and Fidelity Investment 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 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Fidelity Investment.
Diversification Opportunities for Dow Jones and Fidelity Investment
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Fidelity is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Fidelity Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Investment Grade 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 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Investment Grade has no effect on the direction of Dow Jones i.e., Dow Jones and Fidelity Investment go up and down completely randomly.
Pair Corralation between Dow Jones and Fidelity Investment
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.62 times more return on investment than Fidelity Investment. However, Dow Jones is 1.62 times more volatile than Fidelity Investment Grade. It trades about 0.11 of its potential returns per unit of risk. Fidelity Investment Grade is currently generating about 0.03 per unit of risk. If you would invest 3,312,774 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 1,116,877 from holding Dow Jones Industrial or generate 33.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Fidelity Investment Grade
Performance |
| Timeline |
Dow Jones and Fidelity Investment Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Fidelity Investment Grade
Pair trading matchups for Fidelity Investment
Pair Trading with Dow Jones and Fidelity Investment
The main advantage of trading using opposite Dow Jones and Fidelity Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Fidelity Investment 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 Investment will offset losses from the drop in Fidelity Investment's long position.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| Fidelity Investment vs. iShares MSCI EAFE | Fidelity Investment vs. iShares iBoxx Investment | Fidelity Investment vs. iShares TIPS Bond | Fidelity Investment vs. iShares 1 3 Year |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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