Correlation Between Parametric International and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Parametric International 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 Parametric International and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parametric International Equity and Dow Jones Industrial, you can compare the effects of market volatilities on Parametric International 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 Parametric International with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parametric International and Dow Jones.
Diversification Opportunities for Parametric International and Dow Jones
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Parametric and Dow is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Parametric International Equit 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 Parametric International 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 Parametric International Equity 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 Parametric International i.e., Parametric International and Dow Jones go up and down completely randomly.
Pair Corralation between Parametric International and Dow Jones
Assuming the 90 days horizon Parametric International Equity is expected to under-perform the Dow Jones. But the mutual fund apears to be less risky and, when comparing its historical volatility, Parametric International Equity is 1.2 times less risky than Dow Jones. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 258,052 from holding Dow Jones Industrial or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parametric International Equit vs. Dow Jones Industrial
Performance |
| Timeline |
Parametric International and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Parametric International Equity
Pair trading matchups for Parametric International
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Parametric International and Dow Jones
The main advantage of trading using opposite Parametric International and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parametric International 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.The idea behind Parametric International Equity and Dow Jones Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |