Correlation Between Dow Jones and Miller Intermediate
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Miller Intermediate 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 Miller Intermediate 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 Miller Intermediate Bond, you can compare the effects of market volatilities on Dow Jones and Miller Intermediate 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 Miller Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Miller Intermediate.
Diversification Opportunities for Dow Jones and Miller Intermediate
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Miller is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Miller Intermediate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miller Intermediate Bond 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 Miller Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miller Intermediate Bond has no effect on the direction of Dow Jones i.e., Dow Jones and Miller Intermediate go up and down completely randomly.
Pair Corralation between Dow Jones and Miller Intermediate
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.48 times more return on investment than Miller Intermediate. However, Dow Jones is 1.48 times more volatile than Miller Intermediate Bond. It trades about 0.11 of its potential returns per unit of risk. Miller Intermediate Bond is currently generating about 0.09 per unit of risk. If you would invest 3,858,519 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 632,546 from holding Dow Jones Industrial or generate 16.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Miller Intermediate Bond
Performance |
| Timeline |
Dow Jones and Miller Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Miller Intermediate Bond
Pair trading matchups for Miller Intermediate
Pair Trading with Dow Jones and Miller Intermediate
The main advantage of trading using opposite Dow Jones and Miller Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Miller Intermediate 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 Miller Intermediate will offset losses from the drop in Miller Intermediate's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Miller Intermediate vs. Miller Market Neutral | Miller Intermediate vs. Miller Vertible Bond | Miller Intermediate vs. Miller Vertible Bond | Miller Intermediate vs. Miller Vertible Bond |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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