Correlation Between 30 Year and Dow Jones
Can any of the company-specific risk be diversified away by investing in both 30 Year 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 30 Year and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 30 Year Treasury and Dow Jones Industrial, you can compare the effects of market volatilities on 30 Year 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 30 Year with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of 30 Year and Dow Jones.
Diversification Opportunities for 30 Year and Dow Jones
Pay attention - limited upside
The 3 months correlation between ZBUSD and Dow is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding 30 Year Treasury and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and 30 Year 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 30 Year Treasury 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 Industrial has no effect on the direction of 30 Year i.e., 30 Year and Dow Jones go up and down completely randomly.
Pair Corralation between 30 Year and Dow Jones
Assuming the 90 days horizon 30 Year Treasury is expected to under-perform the Dow Jones. But the commodity apears to be less risky and, when comparing its historical volatility, 30 Year Treasury is 1.56 times less risky than Dow Jones. The commodity trades about -0.12 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 4,211,440 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 218,211 from holding Dow Jones Industrial or generate 5.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
30 Year Treasury vs. Dow Jones Industrial
Performance |
| Timeline |
30 Year and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
30 Year Treasury
Pair trading matchups for 30 Year
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with 30 Year and Dow Jones
The main advantage of trading using opposite 30 Year and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 30 Year 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.| 30 Year vs. Corn Futures | 30 Year vs. Silver Futures | 30 Year vs. Orange Juice | 30 Year vs. Brent Crude Oil |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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