Correlation Between Dow Jones and The Arbitrage
Can any of the company-specific risk be diversified away by investing in both Dow Jones and The Arbitrage 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 The Arbitrage 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 The Arbitrage Fund, you can compare the effects of market volatilities on Dow Jones and The Arbitrage 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 The Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and The Arbitrage.
Diversification Opportunities for Dow Jones and The Arbitrage
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and The is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and The Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Arbitrage 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 The Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Arbitrage has no effect on the direction of Dow Jones i.e., Dow Jones and The Arbitrage go up and down completely randomly.
Pair Corralation between Dow Jones and The Arbitrage
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 5.13 times more return on investment than The Arbitrage. However, Dow Jones is 5.13 times more volatile than The Arbitrage Fund. It trades about 0.09 of its potential returns per unit of risk. The Arbitrage Fund is currently generating about 0.14 per unit of risk. If you would invest 4,493,831 in Dow Jones Industrial on August 20, 2025 and sell it today you would earn a total of 165,193 from holding Dow Jones Industrial or generate 3.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. The Arbitrage Fund
Performance |
| Timeline |
Dow Jones and The Arbitrage Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
The Arbitrage Fund
Pair trading matchups for The Arbitrage
Pair Trading with Dow Jones and The Arbitrage
The main advantage of trading using opposite Dow Jones and The Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, The Arbitrage 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 The Arbitrage will offset losses from the drop in The Arbitrage's long position.| Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Hochschild Mining PLC | Dow Jones vs. Boyd Gaming | Dow Jones vs. Mako Mining Corp |
| The Arbitrage vs. The Arbitrage Fund | The Arbitrage vs. The Arbitrage Fund | The Arbitrage vs. The Arbitrage Credit | The Arbitrage vs. The Arbitrage Credit |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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