Correlation Between Dow Jones and Massachusetts Investors
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Massachusetts Investors 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 Massachusetts Investors 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 Massachusetts Investors Trust, you can compare the effects of market volatilities on Dow Jones and Massachusetts Investors 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 Massachusetts Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Massachusetts Investors.
Diversification Opportunities for Dow Jones and Massachusetts Investors
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and MASSACHUSETTS is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Massachusetts Investors Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Massachusetts Investors 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 Massachusetts Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Massachusetts Investors has no effect on the direction of Dow Jones i.e., Dow Jones and Massachusetts Investors go up and down completely randomly.
Pair Corralation between Dow Jones and Massachusetts Investors
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.34 times more return on investment than Massachusetts Investors. However, Dow Jones is 1.34 times more volatile than Massachusetts Investors Trust. It trades about 0.27 of its potential returns per unit of risk. Massachusetts Investors Trust is currently generating about 0.2 per unit of risk. If you would invest 4,223,305 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 248,901 from holding Dow Jones Industrial or generate 5.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Massachusetts Investors Trust
Performance |
| Timeline |
Dow Jones and Massachusetts Investors Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Massachusetts Investors Trust
Pair trading matchups for Massachusetts Investors
Pair Trading with Dow Jones and Massachusetts Investors
The main advantage of trading using opposite Dow Jones and Massachusetts Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Massachusetts Investors 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 Massachusetts Investors will offset losses from the drop in Massachusetts Investors' long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| Massachusetts Investors vs. Alternative Asset Allocation | Massachusetts Investors vs. Touchstone Large Cap | Massachusetts Investors vs. T Rowe Price | Massachusetts Investors vs. Qs Large Cap |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |