Correlation Between Dow Jones and SPDR Nuveen
Can any of the company-specific risk be diversified away by investing in both Dow Jones and SPDR Nuveen 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 SPDR Nuveen 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 SPDR Nuveen Municipal, you can compare the effects of market volatilities on Dow Jones and SPDR Nuveen 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 SPDR Nuveen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and SPDR Nuveen.
Diversification Opportunities for Dow Jones and SPDR Nuveen
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and SPDR is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and SPDR Nuveen Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Nuveen Municipal 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 SPDR Nuveen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Nuveen Municipal has no effect on the direction of Dow Jones i.e., Dow Jones and SPDR Nuveen go up and down completely randomly.
Pair Corralation between Dow Jones and SPDR Nuveen
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 3.83 times more return on investment than SPDR Nuveen. However, Dow Jones is 3.83 times more volatile than SPDR Nuveen Municipal. It trades about 0.19 of its potential returns per unit of risk. SPDR Nuveen Municipal is currently generating about -0.05 per unit of risk. If you would invest 4,329,703 in Dow Jones Industrial on October 25, 2024 and sell it today you would earn a total of 126,804 from holding Dow Jones Industrial or generate 2.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. SPDR Nuveen Municipal
Performance |
| Timeline |
Dow Jones and SPDR Nuveen Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
SPDR Nuveen Municipal
Pair trading matchups for SPDR Nuveen
Pair Trading with Dow Jones and SPDR Nuveen
The main advantage of trading using opposite Dow Jones and SPDR Nuveen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, SPDR Nuveen 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 SPDR Nuveen will offset losses from the drop in SPDR Nuveen's long position.| Dow Jones vs. Xiabuxiabu Catering Management | Dow Jones vs. Neogen | Dow Jones vs. Orion Office Reit | Dow Jones vs. Bassett Furniture Industries |
| SPDR Nuveen vs. Mountain Commerce Bancorp | SPDR Nuveen vs. Magyar Bancorp | SPDR Nuveen vs. Nortech Systems Incorporated | SPDR Nuveen vs. Aquagold International |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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