Correlation Between Dow Jones and 30 Year
Can any of the company-specific risk be diversified away by investing in both Dow Jones and 30 Year 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 30 Year 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 30 Year Treasury, you can compare the effects of market volatilities on Dow Jones and 30 Year 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 30 Year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and 30 Year.
Diversification Opportunities for Dow Jones and 30 Year
Pay attention - limited upside
The 3 months correlation between Dow and ZBUSD is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and 30 Year Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 30 Year Treasury 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 30 Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 30 Year Treasury has no effect on the direction of Dow Jones i.e., Dow Jones and 30 Year go up and down completely randomly.
Pair Corralation between Dow Jones and 30 Year
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.1 times more return on investment than 30 Year. However, Dow Jones is 1.1 times more volatile than 30 Year Treasury. It trades about 0.11 of its potential returns per unit of risk. 30 Year Treasury is currently generating about -0.01 per unit of risk. If you would invest 3,858,519 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 632,546 from holding Dow Jones Industrial or generate 16.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 96.91% |
| Values | Daily Returns |
Dow Jones Industrial vs. 30 Year Treasury
Performance |
| Timeline |
Dow Jones and 30 Year Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
30 Year Treasury
Pair trading matchups for 30 Year
Pair Trading with Dow Jones and 30 Year
The main advantage of trading using opposite Dow Jones and 30 Year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, 30 Year 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 30 Year will offset losses from the drop in 30 Year's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| 30 Year vs. Aluminum Futures | 30 Year vs. Cocoa | 30 Year vs. Silver Futures | 30 Year vs. 10 Year T Note Futures |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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