Correlation Between Mini Dow and Micro Silver
Can any of the company-specific risk be diversified away by investing in both Mini Dow and Micro Silver 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 Micro Silver 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 Micro Silver Futures, you can compare the effects of market volatilities on Mini Dow and Micro Silver 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 Micro Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mini Dow and Micro Silver.
Diversification Opportunities for Mini Dow and Micro Silver
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Mini and Micro is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Mini Dow Jones and Micro Silver Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Silver Futures 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 Micro Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Silver Futures has no effect on the direction of Mini Dow i.e., Mini Dow and Micro Silver go up and down completely randomly.
Pair Corralation between Mini Dow and Micro Silver
Assuming the 90 days horizon Mini Dow is expected to generate 1.99 times less return on investment than Micro Silver. But when comparing it to its historical volatility, Mini Dow Jones is 2.72 times less risky than Micro Silver. It trades about 0.1 of its potential returns per unit of risk. Micro Silver Futures is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,324 in Micro Silver Futures on August 29, 2024 and sell it today you would earn a total of 726.00 from holding Micro Silver Futures or generate 31.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mini Dow Jones vs. Micro Silver Futures
Performance |
| Timeline |
| Mini Dow Jones |
| Micro Silver Futures |
Mini Dow and Micro Silver Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mini Dow and Micro Silver
The main advantage of trading using opposite Mini Dow and Micro Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mini Dow position performs unexpectedly, Micro Silver 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 Micro Silver will offset losses from the drop in Micro Silver's long position.| Mini Dow vs. Live Cattle Futures | Mini Dow vs. US Dollar | Mini Dow vs. Micro E mini Russell | Mini Dow vs. Lumber Futures |
| Micro Silver vs. Micro E mini Russell | Micro Silver vs. Heating Oil | Micro Silver vs. Aluminum Futures | Micro Silver vs. Micro Gold Futures |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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