Correlation Between Dow Jones and Western Asset
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Western Asset 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 Western Asset 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 Western Asset Managed, you can compare the effects of market volatilities on Dow Jones and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Western Asset.
Diversification Opportunities for Dow Jones and Western Asset
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and WESTERN is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Western Asset Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Managed 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Managed has no effect on the direction of Dow Jones i.e., Dow Jones and Western Asset go up and down completely randomly.
Pair Corralation between Dow Jones and Western Asset
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.75 times more return on investment than Western Asset. However, Dow Jones is 2.75 times more volatile than Western Asset Managed. It trades about 0.11 of its potential returns per unit of risk. Western Asset Managed is currently generating about 0.08 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Western Asset Managed
Performance |
| Timeline |
Dow Jones and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Western Asset Managed
Pair trading matchups for Western Asset
Pair Trading with Dow Jones and Western Asset
The main advantage of trading using opposite Dow Jones and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset'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 |
| Western Asset vs. Diversified Municipal Portfolio | Western Asset vs. Western Asset Managed | Western Asset vs. Western Asset Managed | Western Asset vs. Nuveen High Yield |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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