Correlation Between Dow Jones and Pimco Foreign
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Pimco Foreign 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 Pimco Foreign 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 Pimco Foreign Bond, you can compare the effects of market volatilities on Dow Jones and Pimco Foreign 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 Pimco Foreign. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Pimco Foreign.
Diversification Opportunities for Dow Jones and Pimco Foreign
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dow and Pimco is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Pimco Foreign Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Foreign 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 Pimco Foreign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Foreign Bond has no effect on the direction of Dow Jones i.e., Dow Jones and Pimco Foreign go up and down completely randomly.
Pair Corralation between Dow Jones and Pimco Foreign
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.83 times more return on investment than Pimco Foreign. However, Dow Jones is 1.83 times more volatile than Pimco Foreign Bond. It trades about 0.16 of its potential returns per unit of risk. Pimco Foreign Bond is currently generating about 0.05 per unit of risk. If you would invest 3,857,103 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 633,962 from holding Dow Jones Industrial or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. Pimco Foreign Bond
Performance |
| Timeline |
Dow Jones and Pimco Foreign Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pimco Foreign Bond
Pair trading matchups for Pimco Foreign
Pair Trading with Dow Jones and Pimco Foreign
The main advantage of trading using opposite Dow Jones and Pimco Foreign positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Pimco Foreign 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 Pimco Foreign will offset losses from the drop in Pimco Foreign's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| Pimco Foreign vs. Pimco Diversified Income | Pimco Foreign vs. Prudential Core Conservative | Pimco Foreign vs. Harbor Diversified International | Pimco Foreign vs. Aqr Diversified Arbitrage |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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