Correlation Between Federated Government and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Federated Government 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 Federated Government and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Government Ultrashort and Dow Jones Industrial, you can compare the effects of market volatilities on Federated Government 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 Federated Government with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Dow Jones.
Diversification Opportunities for Federated Government and Dow Jones
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Dow is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor 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 Federated Government 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 Federated Government Ultrashort 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 Federated Government i.e., Federated Government and Dow Jones go up and down completely randomly.
Pair Corralation between Federated Government and Dow Jones
Assuming the 90 days horizon Federated Government is expected to generate 2.97 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Federated Government Ultrashort is 6.75 times less risky than Dow Jones. It trades about 0.19 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,418,997 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 1,072,068 from holding Dow Jones Industrial or generate 31.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Government Ultrashor vs. Dow Jones Industrial
Performance |
| Timeline |
Federated Government and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Federated Government Ultrashort
Pair trading matchups for Federated Government
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Federated Government and Dow Jones
The main advantage of trading using opposite Federated Government and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government 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.| Federated Government vs. Dunham Large Cap | Federated Government vs. Siit Large Cap | Federated Government vs. Qs Large Cap | Federated Government vs. Qs Large Cap |
| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |