Correlation Between Dow Jones and Cref Inflation-linked
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Cref Inflation-linked 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 Cref Inflation-linked 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 Cref Inflation Linked Bond, you can compare the effects of market volatilities on Dow Jones and Cref Inflation-linked 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 Cref Inflation-linked. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Cref Inflation-linked.
Diversification Opportunities for Dow Jones and Cref Inflation-linked
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Cref is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Cref Inflation Linked Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cref Inflation Linked 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 Cref Inflation-linked. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cref Inflation Linked has no effect on the direction of Dow Jones i.e., Dow Jones and Cref Inflation-linked go up and down completely randomly.
Pair Corralation between Dow Jones and Cref Inflation-linked
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 3.92 times more return on investment than Cref Inflation-linked. However, Dow Jones is 3.92 times more volatile than Cref Inflation Linked Bond. It trades about 0.2 of its potential returns per unit of risk. Cref Inflation Linked Bond is currently generating about 0.02 per unit of risk. If you would invest 4,093,693 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 397,372 from holding Dow Jones Industrial or generate 9.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Cref Inflation Linked Bond
Performance |
| Timeline |
Dow Jones and Cref Inflation-linked Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Cref Inflation Linked Bond
Pair trading matchups for Cref Inflation-linked
Pair Trading with Dow Jones and Cref Inflation-linked
The main advantage of trading using opposite Dow Jones and Cref Inflation-linked positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Cref Inflation-linked 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 Cref Inflation-linked will offset losses from the drop in Cref Inflation-linked'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 |
| Cref Inflation-linked vs. Vanguard Total Stock | Cref Inflation-linked vs. Vanguard 500 Index | Cref Inflation-linked vs. Vanguard Total Stock | Cref Inflation-linked vs. Vanguard Total Stock |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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