Correlation Between Dow 2x and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Dow 2x 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 Dow 2x and Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Dow 2x 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 Dow 2x with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow 2x and Dow Jones.
Diversification Opportunities for Dow 2x and Dow Jones
Very poor diversification
The 3 months correlation between DOW and Dow is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dow 2x Strategy 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 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 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 Dow 2x i.e., Dow 2x and Dow Jones go up and down completely randomly.
Pair Corralation between Dow 2x and Dow Jones
Assuming the 90 days horizon Dow 2x Strategy is expected to generate 2.02 times more return on investment than Dow Jones. However, Dow 2x is 2.02 times more volatile than Dow Jones Industrial. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.11 per unit of risk. If you would invest 8,921 in Dow 2x Strategy on November 1, 2024 and sell it today you would earn a total of 6,442 from holding Dow 2x Strategy or generate 72.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Dow 2x Strategy vs. Dow Jones Industrial
Performance |
| Timeline |
Dow 2x and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Dow 2x Strategy
Pair trading matchups for Dow 2x
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Dow 2x and Dow Jones
The main advantage of trading using opposite Dow 2x and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 2x 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.| 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 |
| Dow Jones vs. WEC Energy Group | Dow Jones vs. Pure Cycle | Dow Jones vs. Tandy Leather Factory | Dow Jones vs. Tapestry |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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