Correlation Between IDX Dynamic and Dow Jones
Can any of the company-specific risk be diversified away by investing in both IDX Dynamic and Dow Jones 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 IDX Dynamic and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDX Dynamic Fixed and Dow Jones Industrial, you can compare the effects of market volatilities on IDX Dynamic and Dow Jones 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 IDX Dynamic with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDX Dynamic and Dow Jones.
Diversification Opportunities for IDX Dynamic and Dow Jones
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IDX and Dow is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding IDX Dynamic Fixed and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and IDX Dynamic 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 IDX Dynamic Fixed are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of IDX Dynamic i.e., IDX Dynamic and Dow Jones go up and down completely randomly.
Pair Corralation between IDX Dynamic and Dow Jones
Given the investment horizon of 90 days IDX Dynamic is expected to generate 16.52 times less return on investment than Dow Jones. But when comparing it to its historical volatility, IDX Dynamic Fixed is 9.78 times less risky than Dow Jones. It trades about 0.18 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 4,270,656 in Dow Jones Industrial on November 5, 2024 and sell it today you would earn a total of 183,810 from holding Dow Jones Industrial or generate 4.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDX Dynamic Fixed vs. Dow Jones Industrial
Performance |
| Timeline |
IDX Dynamic and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
IDX Dynamic Fixed
Pair trading matchups for IDX Dynamic
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with IDX Dynamic and Dow Jones
The main advantage of trading using opposite IDX Dynamic and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDX Dynamic position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| IDX Dynamic vs. MFS Active Exchange | IDX Dynamic vs. First Trust Exchange Traded | IDX Dynamic vs. Vanguard Intermediate Term Treasury | IDX Dynamic vs. Vanguard Long Term Treasury |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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