Correlation Between Optimum Fixed and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Optimum Fixed 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 Optimum Fixed and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Optimum Fixed Income and Dow Jones Industrial, you can compare the effects of market volatilities on Optimum Fixed 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 Optimum Fixed with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optimum Fixed and Dow Jones.
Diversification Opportunities for Optimum Fixed and Dow Jones
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Optimum and Dow is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Optimum Fixed Income 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 Optimum Fixed 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 Optimum Fixed Income 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 Optimum Fixed i.e., Optimum Fixed and Dow Jones go up and down completely randomly.
Pair Corralation between Optimum Fixed and Dow Jones
Assuming the 90 days horizon Optimum Fixed is expected to generate 3.91 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Optimum Fixed Income is 1.74 times less risky than Dow Jones. It trades about 0.04 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 3,410,864 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 1,080,201 from holding Dow Jones Industrial or generate 31.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Optimum Fixed Income vs. Dow Jones Industrial
Performance |
| Timeline |
Optimum Fixed and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Optimum Fixed Income
Pair trading matchups for Optimum Fixed
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Optimum Fixed and Dow Jones
The main advantage of trading using opposite Optimum Fixed and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimum Fixed 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.| Optimum Fixed vs. Blackrock Exchange Portfolio | Optimum Fixed vs. Janus Investment | Optimum Fixed vs. Schwab Treasury Money | Optimum Fixed vs. First American Funds |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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