Correlation Between Mini Dow and Copper
Can any of the company-specific risk be diversified away by investing in both Mini Dow and Copper 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 Mini Dow and Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mini Dow Jones and Copper, you can compare the effects of market volatilities on Mini Dow and Copper 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 Mini Dow with a short position of Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mini Dow and Copper.
Diversification Opportunities for Mini Dow and Copper
Average diversification
The 3 months correlation between Mini and Copper is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Mini Dow Jones and Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper and Mini Dow 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 Mini Dow Jones are associated (or correlated) with Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper has no effect on the direction of Mini Dow i.e., Mini Dow and Copper go up and down completely randomly.
Pair Corralation between Mini Dow and Copper
Assuming the 90 days horizon Mini Dow Jones is expected to generate 0.54 times more return on investment than Copper. However, Mini Dow Jones is 1.84 times less risky than Copper. It trades about 0.08 of its potential returns per unit of risk. Copper is currently generating about 0.02 per unit of risk. If you would invest 3,398,600 in Mini Dow Jones on August 25, 2024 and sell it today you would earn a total of 1,043,100 from holding Mini Dow Jones or generate 30.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Mini Dow Jones vs. Copper
Performance |
| Timeline |
| Mini Dow Jones |
| Copper |
Mini Dow and Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mini Dow and Copper
The main advantage of trading using opposite Mini Dow and Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mini Dow position performs unexpectedly, Copper 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 Copper will offset losses from the drop in Copper's long position.The idea behind Mini Dow Jones and Copper pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |