Correlation Between Dow Jones and Federated Intermediate
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Federated Intermediate 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 Intermediate 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 Intermediate Municipal, you can compare the effects of market volatilities on Dow Jones and Federated Intermediate 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 Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Federated Intermediate.
Diversification Opportunities for Dow Jones and Federated Intermediate
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Federated is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Federated Intermediate Municip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Intermediate 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 Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Intermediate has no effect on the direction of Dow Jones i.e., Dow Jones and Federated Intermediate go up and down completely randomly.
Pair Corralation between Dow Jones and Federated Intermediate
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 3.88 times more return on investment than Federated Intermediate. However, Dow Jones is 3.88 times more volatile than Federated Intermediate Municipal. It trades about 0.08 of its potential returns per unit of risk. Federated Intermediate Municipal is currently generating about 0.09 per unit of risk. If you would invest 3,320,393 in Dow Jones Industrial on September 13, 2024 and sell it today you would earn a total of 1,094,463 from holding Dow Jones Industrial or generate 32.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Federated Intermediate Municip
Performance |
| Timeline |
Dow Jones and Federated Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Federated Intermediate Municipal
Pair trading matchups for Federated Intermediate
Pair Trading with Dow Jones and Federated Intermediate
The main advantage of trading using opposite Dow Jones and Federated Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Federated Intermediate 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 Intermediate will offset losses from the drop in Federated Intermediate's long position.| Dow Jones vs. ChampionX | Dow Jones vs. Highway Holdings Limited | Dow Jones vs. Westinghouse Air Brake | Dow Jones vs. Cementos Pacasmayo SAA |
| Federated Intermediate vs. Federated Emerging Market | Federated Intermediate vs. Federated Mdt All | Federated Intermediate vs. Federated Mdt Balanced | Federated Intermediate vs. Federated Global Allocation |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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