Correlation Between Dow Jones and Catalyst/smh High
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Catalyst/smh High 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 Catalyst/smh High 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 Catalystsmh High Income, you can compare the effects of market volatilities on Dow Jones and Catalyst/smh High 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 Catalyst/smh High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Catalyst/smh High.
Diversification Opportunities for Dow Jones and Catalyst/smh High
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Catalyst/smh is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Catalystsmh High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystsmh High Income 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 Catalyst/smh High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystsmh High Income has no effect on the direction of Dow Jones i.e., Dow Jones and Catalyst/smh High go up and down completely randomly.
Pair Corralation between Dow Jones and Catalyst/smh High
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 4.16 times more return on investment than Catalyst/smh High. However, Dow Jones is 4.16 times more volatile than Catalystsmh High Income. It trades about 0.26 of its potential returns per unit of risk. Catalystsmh High Income is currently generating about 0.48 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Dow Jones Industrial vs. Catalystsmh High Income
Performance |
| Timeline |
Dow Jones and Catalyst/smh High Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Catalystsmh High Income
Pair trading matchups for Catalyst/smh High
Pair Trading with Dow Jones and Catalyst/smh High
The main advantage of trading using opposite Dow Jones and Catalyst/smh High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Catalyst/smh High 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 Catalyst/smh High will offset losses from the drop in Catalyst/smh High's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Catalyst/smh High vs. Catalystsmh High Income | Catalyst/smh High vs. Prudential Jennison International | Catalyst/smh High vs. Fidelity New Markets | Catalyst/smh High vs. Ohio Variable College |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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