Correlation Between Dow Jones and VanEck CEF
Can any of the company-specific risk be diversified away by investing in both Dow Jones and VanEck CEF 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 VanEck CEF 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 VanEck CEF Municipal, you can compare the effects of market volatilities on Dow Jones and VanEck CEF 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 VanEck CEF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and VanEck CEF.
Diversification Opportunities for Dow Jones and VanEck CEF
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dow and VanEck is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and VanEck CEF Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck CEF Municipal 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 VanEck CEF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck CEF Municipal has no effect on the direction of Dow Jones i.e., Dow Jones and VanEck CEF go up and down completely randomly.
Pair Corralation between Dow Jones and VanEck CEF
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.75 times more return on investment than VanEck CEF. However, Dow Jones is 1.75 times more volatile than VanEck CEF Municipal. It trades about 0.21 of its potential returns per unit of risk. VanEck CEF Municipal is currently generating about 0.05 per unit of risk. If you would invest 4,237,436 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 192,215 from holding Dow Jones Industrial or generate 4.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. VanEck CEF Municipal
Performance |
| Timeline |
Dow Jones and VanEck CEF Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
VanEck CEF Municipal
Pair trading matchups for VanEck CEF
Pair Trading with Dow Jones and VanEck CEF
The main advantage of trading using opposite Dow Jones and VanEck CEF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, VanEck CEF 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 VanEck CEF will offset losses from the drop in VanEck CEF's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| VanEck CEF vs. SPDR Nuveen Bloomberg | VanEck CEF vs. VanEck High Yield | VanEck CEF vs. VanEck Short Muni | VanEck CEF vs. VanEck Long Muni |
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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