Correlation Between Dow Jones and Pear Tree
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Pear Tree 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 Pear Tree 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 Pear Tree Polaris, you can compare the effects of market volatilities on Dow Jones and Pear Tree 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 Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Pear Tree.
Diversification Opportunities for Dow Jones and Pear Tree
Very good diversification
The 3 months correlation between Dow and Pear is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris 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 Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of Dow Jones i.e., Dow Jones and Pear Tree go up and down completely randomly.
Pair Corralation between Dow Jones and Pear Tree
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.56 times more return on investment than Pear Tree. However, Dow Jones is 1.56 times more volatile than Pear Tree Polaris. It trades about 0.29 of its potential returns per unit of risk. Pear Tree Polaris is currently generating about -0.22 per unit of risk. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 258,052 from holding Dow Jones Industrial or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Pear Tree Polaris
Performance |
| Timeline |
Dow Jones and Pear Tree Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pear Tree Polaris
Pair trading matchups for Pear Tree
Pair Trading with Dow Jones and Pear Tree
The main advantage of trading using opposite Dow Jones and Pear Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Pear Tree 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 Pear Tree will offset losses from the drop in Pear Tree'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 |
| Pear Tree vs. Dreyfus Technology Growth | Pear Tree vs. Technology Ultrasector Profund | Pear Tree vs. Fidelity Advisor Technology | Pear Tree vs. Pgim Jennison Technology |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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