Correlation Between Dow Jones and KIMCO

Can any of the company-specific risk be diversified away by investing in both Dow Jones and KIMCO 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 KIMCO 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 KIMCO RLTY P, you can compare the effects of market volatilities on Dow Jones and KIMCO 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 KIMCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and KIMCO.

Diversification Opportunities for Dow Jones and KIMCO

0.05

Correlation Coefficient

Dow Jones  KIMCO

Significant diversification

The 3 months correlation between Dow and KIMCO is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and KIMCO RLTY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIMCO RLTY P 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 KIMCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIMCO RLTY P has no effect on the direction of Dow Jones i.e., Dow Jones and KIMCO go up and down completely randomly.

Pair Corralation between Dow Jones and KIMCO

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the KIMCO. In addition to that, Dow Jones is 6.23 times more volatile than KIMCO RLTY P. It trades about -0.21 of its total potential returns per unit of risk. KIMCO RLTY P is currently generating about 0.01 per unit of volatility. If you would invest  9,663  in KIMCO RLTY P on September 25, 2024 and sell it today you would earn a total of  1.00  from holding KIMCO RLTY P or generate 0.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Dow Jones Industrial  vs.  KIMCO RLTY P

Pair Trading with Dow Jones and KIMCO

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

The idea behind Dow Jones Industrial and KIMCO RLTY P 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.