Correlation Between Dow Jones and Federated Total
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Federated Total 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 Total 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 Total Return, you can compare the effects of market volatilities on Dow Jones and Federated Total 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 Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Federated Total.
Diversification Opportunities for Dow Jones and Federated Total
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Federated is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Federated Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Total Return 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 Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Total Return has no effect on the direction of Dow Jones i.e., Dow Jones and Federated Total go up and down completely randomly.
Pair Corralation between Dow Jones and Federated Total
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.72 times more return on investment than Federated Total. However, Dow Jones is 1.72 times more volatile than Federated Total Return. It trades about 0.08 of its potential returns per unit of risk. Federated Total Return is currently generating about 0.02 per unit of risk. If you would invest 3,394,710 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 1,034,941 from holding Dow Jones Industrial or generate 30.49% 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. Federated Total Return
Performance |
| Timeline |
Dow Jones and Federated Total Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Federated Total Return
Pair trading matchups for Federated Total
Pair Trading with Dow Jones and Federated Total
The main advantage of trading using opposite Dow Jones and Federated Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Federated Total 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 Total will offset losses from the drop in Federated Total'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 |
| Federated Total vs. Pax Balanced Fund | Federated Total vs. Emerging Markets Portfolio | Federated Total vs. Hartford Capital Appreciation | Federated Total vs. Government Bond Fund |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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