Correlation Between Dow Jones and Core Fixed
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Core Fixed 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 Core Fixed 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 Core Fixed Income, you can compare the effects of market volatilities on Dow Jones and Core Fixed 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 Core Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Core Fixed.
Diversification Opportunities for Dow Jones and Core Fixed
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Core is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Core Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Fixed Income 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 Core Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Fixed Income has no effect on the direction of Dow Jones i.e., Dow Jones and Core Fixed go up and down completely randomly.
Pair Corralation between Dow Jones and Core Fixed
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 3.41 times more return on investment than Core Fixed. However, Dow Jones is 3.41 times more volatile than Core Fixed Income. It trades about 0.24 of its potential returns per unit of risk. Core Fixed Income is currently generating about -0.07 per unit of risk. If you would invest 4,211,440 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 218,211 from holding Dow Jones Industrial or generate 5.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Core Fixed Income
Performance |
| Timeline |
Dow Jones and Core Fixed Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Core Fixed Income
Pair trading matchups for Core Fixed
Pair Trading with Dow Jones and Core Fixed
The main advantage of trading using opposite Dow Jones and Core Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Core Fixed 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 Core Fixed will offset losses from the drop in Core Fixed's long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| Core Fixed vs. Blackrock Health Sciences | Core Fixed vs. Baron Health Care | Core Fixed vs. Lord Abbett Health | Core Fixed vs. Health Biotchnology Portfolio |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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