Correlation Between Dow Jones and Money Market
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Money Market 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 Money Market 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 Money Market Obligations, you can compare the effects of market volatilities on Dow Jones and Money Market 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 Money Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Money Market.
Diversification Opportunities for Dow Jones and Money Market
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Money is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Money Market Obligations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Money Market Obligations 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 Money Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Money Market Obligations has no effect on the direction of Dow Jones i.e., Dow Jones and Money Market go up and down completely randomly.
Pair Corralation between Dow Jones and Money Market
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 311,605 from holding Dow Jones Industrial or generate 7.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 35.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Money Market Obligations
Performance |
| Timeline |
Dow Jones and Money Market Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Money Market Obligations
Pair trading matchups for Money Market
Pair Trading with Dow Jones and Money Market
The main advantage of trading using opposite Dow Jones and Money Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Money Market 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 Money Market will offset losses from the drop in Money Market's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| Money Market vs. Western Asset Inflation | Money Market vs. Cref Inflation Linked Bond | Money Market vs. Ab Bond Inflation | Money Market vs. Oklahoma College Savings |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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