Correlation Between United States and Dow Jones
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Dow Jones Islamic, you can compare the effects of market volatilities on United States 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 United States with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Dow Jones.
Diversification Opportunities for United States and Dow Jones
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Dow is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Dow Jones Islamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Islamic and United States 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 United States Steel 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 Islamic has no effect on the direction of United States i.e., United States and Dow Jones go up and down completely randomly.
Pair Corralation between United States and Dow Jones
Taking into account the 90-day investment horizon United States Steel is expected to generate 4.1 times more return on investment than Dow Jones. However, United States is 4.1 times more volatile than Dow Jones Islamic. It trades about 0.11 of its potential returns per unit of risk. Dow Jones Islamic is currently generating about 0.31 per unit of risk. If you would invest 3,821 in United States Steel on September 4, 2024 and sell it today you would earn a total of 274.00 from holding United States Steel or generate 7.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Dow Jones Islamic
Performance |
| Timeline |
United States and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
United States Steel
Pair trading matchups for United States
Dow Jones Islamic
Pair trading matchups for Dow Jones
Pair Trading with United States and Dow Jones
The main advantage of trading using opposite United States and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Constellium Nv | United States vs. Century Aluminum | United States vs. China Hongqiao Group | United States vs. Kaiser Aluminum |
| Dow Jones vs. High Performance Beverages | Dow Jones vs. SEI Investments | Dow Jones vs. Monster Beverage Corp | Dow Jones vs. Bank of America |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |