Correlation Between Dow Jones and Sivers IMA

Can any of the company-specific risk be diversified away by investing in both Dow Jones and Sivers IMA 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 Dow Jones and Sivers IMA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dow Jones Industrial and Sivers IMA Holding, you can compare the effects of market volatilities on Dow Jones and Sivers IMA 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 Dow Jones with a short position of Sivers IMA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Sivers IMA.

Diversification Opportunities for Dow Jones and Sivers IMA

-0.46

Correlation Coefficient

Dow Jones  Sivers IMA

Very good diversification

The 3 months correlation between Dow and Sivers is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Sivers IMA Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sivers IMA Holding and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Sivers IMA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sivers IMA Holding has no effect on the direction of Dow Jones i.e., Dow Jones and Sivers IMA go up and down completely randomly.

Pair Corralation between Dow Jones and Sivers IMA

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Sivers IMA. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 8.37 times less risky than Sivers IMA. The index trades about -0.04 of its potential returns per unit of risk. The Sivers IMA Holding is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  317.00  in Sivers IMA Holding on December 30, 2024 and sell it today you would earn a total of  64.00  from holding Sivers IMA Holding or generate 20.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Dow Jones Industrial  vs.  Sivers IMA Holding

Pair Trading with Dow Jones and Sivers IMA

The main advantage of trading using opposite Dow Jones and Sivers IMA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Sivers IMA 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 Sivers IMA will offset losses from the drop in Sivers IMA's long position.

The idea behind Dow Jones Industrial and Sivers IMA Holding 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.