Correlation Between Dow Jones and Core Plus
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Core Plus 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 Plus 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 Plus Income, you can compare the effects of market volatilities on Dow Jones and Core Plus 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 Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Core Plus.
Diversification Opportunities for Dow Jones and Core Plus
Excellent diversification
The 3 months correlation between Dow and CORE is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Core Plus Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Plus 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 Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Plus Income has no effect on the direction of Dow Jones i.e., Dow Jones and Core Plus go up and down completely randomly.
Pair Corralation between Dow Jones and Core Plus
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.07 times more return on investment than Core Plus. However, Dow Jones is 2.07 times more volatile than Core Plus Income. It trades about 0.08 of its potential returns per unit of risk. Core Plus Income is currently generating about 0.06 per unit of risk. If you would invest 3,378,148 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 1,094,058 from holding Dow Jones Industrial or generate 32.39% 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 Plus Income
Performance |
| Timeline |
Dow Jones and Core Plus Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Core Plus Income
Pair trading matchups for Core Plus
Pair Trading with Dow Jones and Core Plus
The main advantage of trading using opposite Dow Jones and Core Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Core Plus 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 Plus will offset losses from the drop in Core Plus' long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Core Plus vs. Pimco Income Fund | Core Plus vs. HUMANA INC | Core Plus vs. Aquagold International | Core Plus vs. Barloworld Ltd ADR |
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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