Correlation Between Dow 2x and Boston Trust
Can any of the company-specific risk be diversified away by investing in both Dow 2x and Boston Trust 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 Dow 2x and Boston Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow 2x Strategy and Boston Trust Midcap, you can compare the effects of market volatilities on Dow 2x and Boston Trust 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 Dow 2x with a short position of Boston Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow 2x and Boston Trust.
Diversification Opportunities for Dow 2x and Boston Trust
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Boston is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dow 2x Strategy and Boston Trust Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Trust Midcap and Dow 2x 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 Dow 2x Strategy are associated (or correlated) with Boston Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Trust Midcap has no effect on the direction of Dow 2x i.e., Dow 2x and Boston Trust go up and down completely randomly.
Pair Corralation between Dow 2x and Boston Trust
Assuming the 90 days horizon Dow 2x Strategy is expected to generate 2.35 times more return on investment than Boston Trust. However, Dow 2x is 2.35 times more volatile than Boston Trust Midcap. It trades about 0.26 of its potential returns per unit of risk. Boston Trust Midcap is currently generating about 0.29 per unit of risk. If you would invest 14,492 in Dow 2x Strategy on August 28, 2024 and sell it today you would earn a total of 1,647 from holding Dow 2x Strategy or generate 11.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow 2x Strategy vs. Boston Trust Midcap
Performance |
| Timeline |
| Dow 2x Strategy |
| Boston Trust Midcap |
Dow 2x and Boston Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow 2x and Boston Trust
The main advantage of trading using opposite Dow 2x and Boston Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 2x position performs unexpectedly, Boston Trust 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 Boston Trust will offset losses from the drop in Boston Trust's long position.| Dow 2x vs. Dow 2x Strategy | Dow 2x vs. Dow 2x Strategy | Dow 2x vs. Nasdaq 100 2x Strategy | Dow 2x vs. Ultramid Cap Profund Ultramid Cap |
| Boston Trust vs. Boston Trust Asset | Boston Trust vs. Virtus Kar Mid Cap | Boston Trust vs. Virtus Kar Mid Cap | Boston Trust vs. Boston Trust Small |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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