Correlation Between Dow Jones and FT Cboe
Can any of the company-specific risk be diversified away by investing in both Dow Jones and FT Cboe 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 FT Cboe 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 FT Cboe Vest, you can compare the effects of market volatilities on Dow Jones and FT Cboe 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 FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and FT Cboe.
Diversification Opportunities for Dow Jones and FT Cboe
Poor diversification
The 3 months correlation between Dow and KNG is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Dow Jones i.e., Dow Jones and FT Cboe go up and down completely randomly.
Pair Corralation between Dow Jones and FT Cboe
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.21 times more return on investment than FT Cboe. However, Dow Jones is 1.21 times more volatile than FT Cboe Vest. It trades about 0.15 of its potential returns per unit of risk. FT Cboe Vest is currently generating about 0.13 per unit of risk. If you would invest 3,409,586 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 1,081,479 from holding Dow Jones Industrial or generate 31.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. FT Cboe Vest
Performance |
| Timeline |
Dow Jones and FT Cboe Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
FT Cboe Vest
Pair trading matchups for FT Cboe
Pair Trading with Dow Jones and FT Cboe
The main advantage of trading using opposite Dow Jones and FT Cboe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, FT Cboe 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 FT Cboe will offset losses from the drop in FT Cboe's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| FT Cboe vs. Global X SP | FT Cboe vs. Global X Nasdaq | FT Cboe vs. First Trust BuyWrite | FT Cboe vs. Amplify CWP Enhanced |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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