Correlation Between College Retirement and Dow Jones
Can any of the company-specific risk be diversified away by investing in both College Retirement 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 College Retirement and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between College Retirement Equities and Dow Jones Industrial, you can compare the effects of market volatilities on College Retirement 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 College Retirement with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of College Retirement and Dow Jones.
Diversification Opportunities for College Retirement and Dow Jones
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between College and Dow is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding College Retirement Equities 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 College Retirement 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 College Retirement Equities 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 College Retirement i.e., College Retirement and Dow Jones go up and down completely randomly.
Pair Corralation between College Retirement and Dow Jones
Assuming the 90 days trading horizon College Retirement Equities is expected to generate 1.11 times more return on investment than Dow Jones. However, College Retirement is 1.11 times more volatile than Dow Jones Industrial. It trades about 0.1 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 24,783 in College Retirement Equities on October 26, 2024 and sell it today you would earn a total of 10,630 from holding College Retirement Equities or generate 42.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
College Retirement Equities vs. Dow Jones Industrial
Performance |
| Timeline |
College Retirement and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
College Retirement Equities
Pair trading matchups for College Retirement
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with College Retirement and Dow Jones
The main advantage of trading using opposite College Retirement and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if College Retirement 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.| College Retirement vs. Vanguard Total Stock | College Retirement vs. Vanguard 500 Index | College Retirement vs. Vanguard Total Stock | College Retirement vs. Vanguard Total Stock |
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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 Stocks Directory module to find actively traded stocks across global markets.
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