Correlation Between Dow Jones and Optimum Fixed
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Optimum Fixed 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 Optimum Fixed 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 Optimum Fixed Income, you can compare the effects of market volatilities on Dow Jones and Optimum Fixed 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 Optimum Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Optimum Fixed.
Diversification Opportunities for Dow Jones and Optimum Fixed
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Optimum is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Optimum Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Fixed Income 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 Optimum Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Fixed Income has no effect on the direction of Dow Jones i.e., Dow Jones and Optimum Fixed go up and down completely randomly.
Pair Corralation between Dow Jones and Optimum Fixed
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.38 times more return on investment than Optimum Fixed. However, Dow Jones is 2.38 times more volatile than Optimum Fixed Income. It trades about 0.38 of its potential returns per unit of risk. Optimum Fixed Income is currently generating about 0.14 per unit of risk. If you would invest 4,179,460 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 311,605 from holding Dow Jones Industrial or generate 7.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Optimum Fixed Income
Performance |
| Timeline |
Dow Jones and Optimum Fixed Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Optimum Fixed Income
Pair trading matchups for Optimum Fixed
Pair Trading with Dow Jones and Optimum Fixed
The main advantage of trading using opposite Dow Jones and Optimum Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Optimum Fixed 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 Optimum Fixed will offset losses from the drop in Optimum Fixed's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| Optimum Fixed vs. Adams Natural Resources | Optimum Fixed vs. Goehring Rozencwajg Resources | Optimum Fixed vs. Gamco Natural Resources | Optimum Fixed vs. World Energy Fund |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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