Correlation Between Dow Jones and Columbia Convertible
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Columbia Convertible 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 Columbia Convertible 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 Columbia Convertible Securities, you can compare the effects of market volatilities on Dow Jones and Columbia Convertible 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 Columbia Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Columbia Convertible.
Diversification Opportunities for Dow Jones and Columbia Convertible
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Columbia is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Columbia Convertible Securitie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Convertible 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 Columbia Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Convertible has no effect on the direction of Dow Jones i.e., Dow Jones and Columbia Convertible go up and down completely randomly.
Pair Corralation between Dow Jones and Columbia Convertible
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Columbia Convertible. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 1.01 times less risky than Columbia Convertible. The index trades about -0.24 of its potential returns per unit of risk. The Columbia Convertible Securities is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 2,255 in Columbia Convertible Securities on October 10, 2024 and sell it today you would lose (28.00) from holding Columbia Convertible Securities or give up 1.24% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Dow Jones Industrial vs. Columbia Convertible Securitie
Performance |
Timeline |
Dow Jones and Columbia Convertible Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Columbia Convertible Securities
Pair trading matchups for Columbia Convertible
Pair Trading with Dow Jones and Columbia Convertible
The main advantage of trading using opposite Dow Jones and Columbia Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Columbia Convertible 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 Columbia Convertible will offset losses from the drop in Columbia Convertible's long position.Dow Jones vs. Thai Beverage PCL | Dow Jones vs. ServiceNow | Dow Jones vs. Loud Beverage Group | Dow Jones vs. Suntory Beverage Food |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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