Correlation Between Mini Dow and Five Year
Can any of the company-specific risk be diversified away by investing in both Mini Dow and Five Year 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 Five Year 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 Five Year Treasury Note, you can compare the effects of market volatilities on Mini Dow and Five Year 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 Five Year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mini Dow and Five Year.
Diversification Opportunities for Mini Dow and Five Year
Excellent diversification
The 3 months correlation between Mini and Five is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mini Dow Jones and Five Year Treasury Note in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Year Treasury 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 Five Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Year Treasury has no effect on the direction of Mini Dow i.e., Mini Dow and Five Year go up and down completely randomly.
Pair Corralation between Mini Dow and Five Year
Assuming the 90 days horizon Mini Dow Jones is expected to generate 5.34 times more return on investment than Five Year. However, Mini Dow is 5.34 times more volatile than Five Year Treasury Note. It trades about 0.25 of its potential returns per unit of risk. Five Year Treasury Note is currently generating about -0.1 per unit of risk. If you would invest 4,260,600 in Mini Dow Jones on August 29, 2024 and sell it today you would earn a total of 239,100 from holding Mini Dow Jones or generate 5.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mini Dow Jones vs. Five Year Treasury Note
Performance |
| Timeline |
| Mini Dow Jones |
| Five Year Treasury |
Mini Dow and Five Year Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mini Dow and Five Year
The main advantage of trading using opposite Mini Dow and Five Year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mini Dow position performs unexpectedly, Five Year 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 Five Year will offset losses from the drop in Five Year'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 |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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