Correlation Between Dow Jones and MicroSectors Travel
Can any of the company-specific risk be diversified away by investing in both Dow Jones and MicroSectors Travel 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 MicroSectors Travel 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 MicroSectors Travel 3X, you can compare the effects of market volatilities on Dow Jones and MicroSectors Travel 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 MicroSectors Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and MicroSectors Travel.
Diversification Opportunities for Dow Jones and MicroSectors Travel
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and MicroSectors is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and MicroSectors Travel 3X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Travel 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 MicroSectors Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Travel has no effect on the direction of Dow Jones i.e., Dow Jones and MicroSectors Travel go up and down completely randomly.
Pair Corralation between Dow Jones and MicroSectors Travel
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.92 times less return on investment than MicroSectors Travel. But when comparing it to its historical volatility, Dow Jones Industrial is 2.72 times less risky than MicroSectors Travel. It trades about 0.17 of its potential returns per unit of risk. MicroSectors Travel 3X is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 5,591 in MicroSectors Travel 3X on October 20, 2024 and sell it today you would earn a total of 416.00 from holding MicroSectors Travel 3X or generate 7.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Dow Jones Industrial vs. MicroSectors Travel 3X
Performance |
| Timeline |
Dow Jones and MicroSectors Travel Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
MicroSectors Travel 3X
Pair trading matchups for MicroSectors Travel
Pair Trading with Dow Jones and MicroSectors Travel
The main advantage of trading using opposite Dow Jones and MicroSectors Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, MicroSectors Travel 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 MicroSectors Travel will offset losses from the drop in MicroSectors Travel's long position.| Dow Jones vs. SkyWest | Dow Jones vs. Air Transport Services | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Emerson Radio |
| MicroSectors Travel vs. ProShares Ultra SP500 | MicroSectors Travel vs. Direxion Daily SP500 | MicroSectors Travel vs. ProShares Ultra QQQ | MicroSectors Travel vs. ProShares UltraPro SP500 |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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