Correlation Between Money Market and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Money Market 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 Money Market and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Money Market Obligations and Dow Jones Industrial, you can compare the effects of market volatilities on Money Market 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 Money Market with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Money Market and Dow Jones.
Diversification Opportunities for Money Market and Dow Jones
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Money and Dow is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Money Market Obligations 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 Money Market 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 Money Market Obligations 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 Money Market i.e., Money Market and Dow Jones go up and down completely randomly.
Pair Corralation between Money Market and Dow Jones
If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Money Market Obligations vs. Dow Jones Industrial
Performance |
| Timeline |
Money Market and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Money Market Obligations
Pair trading matchups for Money Market
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Money Market and Dow Jones
The main advantage of trading using opposite Money Market and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Money Market 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.| Money Market vs. Ab Small Cap | Money Market vs. T Rowe Price | Money Market vs. Victory Rs Small | Money Market vs. Legg Mason Partners |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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