Correlation Between MULTI-INDEX 2010 and DOW JONES

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both MULTI-INDEX 2010 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 MULTI-INDEX 2010 and DOW JONES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MULTI-INDEX 2010 LIFETIME and DOW JONES INDUSTRIAL, you can compare the effects of market volatilities on MULTI-INDEX 2010 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 MULTI-INDEX 2010 with a short position of DOW JONES. Check out your portfolio center. Please also check ongoing floating volatility patterns of MULTI-INDEX 2010 and DOW JONES.

Diversification Opportunities for MULTI-INDEX 2010 and DOW JONES

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between MULTI-INDEX and DOW JONES is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MULTI-INDEX 2010 LIFETIME 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 MULTI-INDEX 2010 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 MULTI-INDEX 2010 LIFETIME 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 MULTI-INDEX 2010 i.e., MULTI-INDEX 2010 and DOW JONES go up and down completely randomly.
    Optimize

Pair Corralation between MULTI-INDEX 2010 and DOW JONES

If you would invest  3,015,454  in DOW JONES INDUSTRIAL on September 7, 2022 and sell it today you would earn a total of  443,523  from holding DOW JONES INDUSTRIAL or generate 14.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.2%
ValuesDaily Returns

MULTI-INDEX 2010 LIFETIME  vs.  DOW JONES INDUSTRIAL

 Performance (%) 
       Timeline  

MULTI-INDEX 2010 and DOW JONES Volatility Contrast

   Predicted Return Density   
       Returns  

MULTI-INDEX 2010 LIFETIME

Pair trading matchups for MULTI-INDEX 2010

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against MULTI-INDEX 2010 as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. MULTI-INDEX 2010's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, MULTI-INDEX 2010's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to MULTI-INDEX 2010 LIFETIME.

DOW JONES INDUSTRIAL

Pair trading matchups for DOW JONES

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW JONES as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW JONES's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW JONES's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW JONES INDUSTRIAL.

Pair Trading with MULTI-INDEX 2010 and DOW JONES

The main advantage of trading using opposite MULTI-INDEX 2010 and DOW JONES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MULTI-INDEX 2010 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's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against MULTI-INDEX 2010 as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. MULTI-INDEX 2010's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, MULTI-INDEX 2010's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to MULTI-INDEX 2010 LIFETIME.
The idea behind MULTI-INDEX 2010 LIFETIME and DOW JONES INDUSTRIAL 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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW JONES as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW JONES's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW JONES's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW JONES INDUSTRIAL.
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

Other Complementary Tools

Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
Probability Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Go
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Go
Bond Directory
Find actively traded corporate debentures issued by US companies
Go
Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
Go
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Go
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Go
Financial Widgets
Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets
Go
Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
Go
Balance Of Power
Check stock momentum by analyzing Balance Of Power indicator and other technical ratios
Go
Fund Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Go
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Go