Correlation Between Banking Fund and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Banking Fund 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 Banking Fund and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banking Fund Class and Dow Jones Industrial, you can compare the effects of market volatilities on Banking Fund 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 Banking Fund with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banking Fund and Dow Jones.
Diversification Opportunities for Banking Fund and Dow Jones
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BANKING and DOW is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Banking Fund Class 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 Banking Fund 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 Banking Fund Class 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 Banking Fund i.e., Banking Fund and Dow Jones go up and down completely randomly.
Pair Corralation between Banking Fund and Dow Jones
Assuming the 90 days horizon Banking Fund Class is expected to under-perform the Dow Jones. In addition to that, Banking Fund is 1.74 times more volatile than Dow Jones Industrial. It trades about -0.18 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.19 per unit of volatility. If you would invest 10,575 in Dow Jones Industrial on November 28, 2024 and sell it today you would lose (260.00) from holding Dow Jones Industrial or give up 2.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banking Fund Class vs. Dow Jones Industrial
Performance |
| Timeline |
| Banking Fund Class |
| Dow Jones Industrial |
Banking Fund and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banking Fund and Dow Jones
The main advantage of trading using opposite Banking Fund and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banking Fund 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.| Banking Fund vs. Calvert Global Energy | Banking Fund vs. Transamerica Mlp Energy | Banking Fund vs. Salient Mlp Energy | Banking Fund vs. Pimco Energy Tactical |
| Dow Jones vs. Tax Managed International Equity | Dow Jones vs. Rationalrgn Hedged Equity | Dow Jones vs. Ms Global Fixed | Dow Jones vs. T Rowe Price |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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