Correlation Between Dow Jones and New York
Can any of the company-specific risk be diversified away by investing in both Dow Jones and New York 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 New York 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 New York Municipal, you can compare the effects of market volatilities on Dow Jones and New York 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 New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and New York.
Diversification Opportunities for Dow Jones and New York
Significant diversification
The 3 months correlation between Dow and New is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and New York Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York Municipal 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 New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York Municipal has no effect on the direction of Dow Jones i.e., Dow Jones and New York go up and down completely randomly.
Pair Corralation between Dow Jones and New York
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.91 times more return on investment than New York. However, Dow Jones is 2.91 times more volatile than New York Municipal. It trades about 0.11 of its potential returns per unit of risk. New York Municipal is currently generating about 0.09 per unit of risk. If you would invest 3,406,633 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 1,084,432 from holding Dow Jones Industrial or generate 31.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. New York Municipal
Performance |
| Timeline |
Dow Jones and New York Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
New York Municipal
Pair trading matchups for New York
Pair Trading with Dow Jones and New York
The main advantage of trading using opposite Dow Jones and New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, New York 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 New York will offset losses from the drop in New York's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| New York vs. Pimco High Yield | New York vs. Municipal Bond Fund | New York vs. Pimco Floating Income | New York vs. Investment Grade Porate |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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