Correlation Between State Street and Dow Jones
Can any of the company-specific risk be diversified away by investing in both State Street 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 State Street and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Master and Dow Jones Industrial, you can compare the effects of market volatilities on State Street 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 State Street with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Dow Jones.
Diversification Opportunities for State Street and Dow Jones
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between State and Dow is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding State Street Master 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 State Street 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 State Street Master 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 State Street i.e., State Street and Dow Jones go up and down completely randomly.
Pair Corralation between State Street and Dow Jones
Assuming the 90 days horizon State Street is expected to generate 5.23 times less return on investment than Dow Jones. But when comparing it to its historical volatility, State Street Master is 2.73 times less risky than Dow Jones. It trades about 0.06 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,595,089 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 834,562 from holding Dow Jones Industrial or generate 23.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.42% |
| Values | Daily Returns |
State Street Master vs. Dow Jones Industrial
Performance |
| Timeline |
State Street and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
State Street Master
Pair trading matchups for State Street
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with State Street and Dow Jones
The main advantage of trading using opposite State Street and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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.| State Street vs. Davis Financial Fund | State Street vs. Mesirow Financial Small | State Street vs. Prudential Jennison Financial | State Street vs. Transamerica Financial Life |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |