Correlation Between Mini Dow and Silver Futures
Can any of the company-specific risk be diversified away by investing in both Mini Dow and Silver Futures 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 Silver Futures 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 Silver Futures, you can compare the effects of market volatilities on Mini Dow and Silver Futures 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 Silver Futures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mini Dow and Silver Futures.
Diversification Opportunities for Mini Dow and Silver Futures
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mini and Silver is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Mini Dow Jones and Silver Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 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 Silver Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Futures has no effect on the direction of Mini Dow i.e., Mini Dow and Silver Futures go up and down completely randomly.
Pair Corralation between Mini Dow and Silver Futures
Assuming the 90 days horizon Mini Dow Jones is expected to generate 0.37 times more return on investment than Silver Futures. However, Mini Dow Jones is 2.71 times less risky than Silver Futures. It trades about 0.16 of its potential returns per unit of risk. Silver Futures is currently generating about 0.01 per unit of risk. If you would invest 3,823,100 in Mini Dow Jones on August 28, 2024 and sell it today you would earn a total of 636,900 from holding Mini Dow Jones or generate 16.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mini Dow Jones vs. Silver Futures
Performance |
| Timeline |
| Mini Dow Jones |
| Silver Futures |
Mini Dow and Silver Futures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mini Dow and Silver Futures
The main advantage of trading using opposite Mini Dow and Silver Futures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mini Dow position performs unexpectedly, Silver Futures 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 Silver Futures will offset losses from the drop in Silver Futures' long position.| Mini Dow vs. Orange Juice | Mini Dow vs. Brent Crude Oil | Mini Dow vs. Natural Gas | Mini Dow vs. Five Year Treasury Note |
| Silver Futures vs. Sugar | Silver Futures vs. Nasdaq 100 | Silver Futures vs. Mini Dow Jones | Silver Futures vs. Five Year Treasury Note |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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