Correlation Between Dow Jones and Tiaa-cref Lifecycle
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Tiaa-cref Lifecycle 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 Tiaa-cref Lifecycle 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 Tiaa Cref Lifecycle Index, you can compare the effects of market volatilities on Dow Jones and Tiaa-cref Lifecycle 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 Tiaa-cref Lifecycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Tiaa-cref Lifecycle.
Diversification Opportunities for Dow Jones and Tiaa-cref Lifecycle
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Tiaa-cref is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Tiaa Cref Lifecycle Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiaa Cref Lifecycle 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 Tiaa-cref Lifecycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tiaa Cref Lifecycle has no effect on the direction of Dow Jones i.e., Dow Jones and Tiaa-cref Lifecycle go up and down completely randomly.
Pair Corralation between Dow Jones and Tiaa-cref Lifecycle
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.1 times more return on investment than Tiaa-cref Lifecycle. However, Dow Jones is 2.1 times more volatile than Tiaa Cref Lifecycle Index. It trades about 0.37 of its potential returns per unit of risk. Tiaa Cref Lifecycle Index is currently generating about 0.3 per unit of risk. If you would invest 4,179,460 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 298,740 from holding Dow Jones Industrial or generate 7.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Tiaa Cref Lifecycle Index
Performance |
| Timeline |
Dow Jones and Tiaa-cref Lifecycle Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Tiaa Cref Lifecycle Index
Pair trading matchups for Tiaa-cref Lifecycle
Pair Trading with Dow Jones and Tiaa-cref Lifecycle
The main advantage of trading using opposite Dow Jones and Tiaa-cref Lifecycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Tiaa-cref Lifecycle 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 Tiaa-cref Lifecycle will offset losses from the drop in Tiaa-cref Lifecycle's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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