Correlation Between Dow Jones and Government Street
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Government Street 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 Government Street 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 Government Street Equity, you can compare the effects of market volatilities on Dow Jones and Government Street 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 Government Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Government Street.
Diversification Opportunities for Dow Jones and Government Street
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Government is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Government Street Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Street Equity 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 Government Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Street Equity has no effect on the direction of Dow Jones i.e., Dow Jones and Government Street go up and down completely randomly.
Pair Corralation between Dow Jones and Government Street
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.04 times less return on investment than Government Street. But when comparing it to its historical volatility, Dow Jones Industrial is 1.22 times less risky than Government Street. It trades about 0.1 of its potential returns per unit of risk. Government Street Equity is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 12,837 in Government Street Equity on October 22, 2024 and sell it today you would earn a total of 168.00 from holding Government Street Equity or generate 1.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
Dow Jones Industrial vs. Government Street Equity
Performance |
| Timeline |
Dow Jones and Government Street Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Government Street Equity
Pair trading matchups for Government Street
Pair Trading with Dow Jones and Government Street
The main advantage of trading using opposite Dow Jones and Government Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Government Street 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 Government Street will offset losses from the drop in Government Street's long position.| Dow Jones vs. Nasdaq Inc | Dow Jones vs. Summit Materials | Dow Jones vs. Vulcan Materials | Dow Jones vs. Celsius Holdings |
| Government Street vs. Arrow Managed Futures | Government Street vs. Fpddjx | Government Street vs. Wmcapx | Government Street vs. Fwnhtx |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |