Correlation Between Commodities Strategy and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Commodities Strategy 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 Commodities Strategy and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commodities Strategy Fund and Dow Jones Industrial, you can compare the effects of market volatilities on Commodities Strategy 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 Commodities Strategy with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commodities Strategy and Dow Jones.
Diversification Opportunities for Commodities Strategy and Dow Jones
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Commodities and Dow is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Commodities Strategy Fund 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 Commodities Strategy 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 Commodities Strategy Fund 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 Commodities Strategy i.e., Commodities Strategy and Dow Jones go up and down completely randomly.
Pair Corralation between Commodities Strategy and Dow Jones
Assuming the 90 days horizon Commodities Strategy Fund is expected to generate 0.88 times more return on investment than Dow Jones. However, Commodities Strategy Fund is 1.14 times less risky than Dow Jones. It trades about 0.06 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.04 per unit of risk. If you would invest 14,980 in Commodities Strategy Fund on December 30, 2024 and sell it today you would earn a total of 429.00 from holding Commodities Strategy Fund or generate 2.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Commodities Strategy Fund vs. Dow Jones Industrial
Performance |
Timeline |
Commodities Strategy and Dow Jones Volatility Contrast
Predicted Return Density |
Returns |
Commodities Strategy Fund
Pair trading matchups for Commodities Strategy
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Commodities Strategy and Dow Jones
The main advantage of trading using opposite Commodities Strategy and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commodities Strategy 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.Commodities Strategy vs. Oklahoma College Savings | Commodities Strategy vs. Fidelity Managed Retirement | Commodities Strategy vs. Multimanager Lifestyle Moderate | Commodities Strategy vs. One Choice In |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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