Correlation Between New York and Dow Jones
Can any of the company-specific risk be diversified away by investing in both New York 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 New York and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New York Bond and Dow Jones Industrial, you can compare the effects of market volatilities on New York 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 New York with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of New York and Dow Jones.
Diversification Opportunities for New York and Dow Jones
Good diversification
The 3 months correlation between New and Dow is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding New York Bond 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 New York 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 New York Bond 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 New York i.e., New York and Dow Jones go up and down completely randomly.
Pair Corralation between New York and Dow Jones
Assuming the 90 days horizon New York is expected to generate 2.7 times less return on investment than Dow Jones. But when comparing it to its historical volatility, New York Bond is 2.21 times less risky than Dow Jones. It trades about 0.07 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,378,148 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 1,094,058 from holding Dow Jones Industrial or generate 32.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New York Bond vs. Dow Jones Industrial
Performance |
| Timeline |
New York and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
New York Bond
Pair trading matchups for New York
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with New York and Dow Jones
The main advantage of trading using opposite New York and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New York 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.| New York vs. Heartland Value Plus | New York vs. Mutual Of America | New York vs. Amg River Road | New York vs. Great West Loomis Sayles |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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