Correlation Between Dow Jones and Sit Tax-free
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Sit Tax-free 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 Sit Tax-free 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 Sit Tax Free Income, you can compare the effects of market volatilities on Dow Jones and Sit Tax-free 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 Sit Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Sit Tax-free.
Diversification Opportunities for Dow Jones and Sit Tax-free
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and Sit is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Sit Tax Free Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Tax Free 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 Sit Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Tax Free has no effect on the direction of Dow Jones i.e., Dow Jones and Sit Tax-free go up and down completely randomly.
Pair Corralation between Dow Jones and Sit Tax-free
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 3.04 times more return on investment than Sit Tax-free. However, Dow Jones is 3.04 times more volatile than Sit Tax Free Income. It trades about 0.16 of its potential returns per unit of risk. Sit Tax Free Income is currently generating about 0.17 per unit of risk. If you would invest 3,857,103 in Dow Jones Industrial on September 1, 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 Together |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. Sit Tax Free Income
Performance |
| Timeline |
Dow Jones and Sit Tax-free Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Sit Tax Free Income
Pair trading matchups for Sit Tax-free
Pair Trading with Dow Jones and Sit Tax-free
The main advantage of trading using opposite Dow Jones and Sit Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Sit Tax-free 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 Sit Tax-free will offset losses from the drop in Sit Tax-free's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Sit Tax-free vs. Kinetics Small Cap | Sit Tax-free vs. Vanguard Growth And | Sit Tax-free vs. T Rowe Price | Sit Tax-free vs. Growth Opportunities Fund |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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