Correlation Between Dws Rreef and DOW

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

Diversification Opportunities for Dws Rreef and DOW

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between AAAPX and DOW is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dws Rreef Real and DOW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOW and Dws Rreef 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 Dws Rreef Real are associated (or correlated) with DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of Dws Rreef i.e., Dws Rreef and DOW go up and down completely randomly.
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Pair Corralation between Dws Rreef and DOW

Assuming the 90 days horizon Dws Rreef Real is expected to under-perform the DOW. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dws Rreef Real is 1.15 times less risky than DOW. The mutual fund trades about -0.14 of its potential returns per unit of risk. The DOW is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  3,458,357  in DOW on April 7, 2022 and sell it today you would lose (364,297)  from holding DOW or give up 10.53% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy98.36%
ValuesDaily Returns

Dws Rreef Real  vs.  DOW

 Performance (%) 
      Timeline 

Dws Rreef and DOW Volatility Contrast

 Predicted Return Density 
      Returns 

Dws Rreef Real

Pair trading matchups for Dws Rreef

DOW

Pair trading matchups for DOW

GM vs. DOW
ATT vs. DOW
Purecycle Technologies vs. DOW
Mandiant vs. DOW
Bancfirst Corp vs. DOW
Interactive Brokers vs. DOW
Ollies Bargain vs. DOW
Alpha Metallurgical vs. DOW
Freyr Battery vs. DOW
Erie Indemnity vs. DOW
Eastgroup Properties vs. DOW
MP Materials vs. DOW
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 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'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'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.

Pair Trading with Dws Rreef and DOW

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

Dws Rreef Real

Pair trading matchups for Dws Rreef

The idea behind Dws Rreef Real and DOW 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.

DOW

Pair trading matchups for DOW

Eastgroup Properties vs. DOW
Greenlight Cap vs. DOW
Interactive Brokers vs. DOW
Ollies Bargain vs. DOW
Alpha Metallurgical vs. DOW
Erie Indemnity vs. DOW
Freyr Battery vs. DOW
Mandiant vs. DOW
Penn Natl vs. DOW
Purecycle Technologies vs. DOW
Halliburton vs. DOW
Twitter vs. DOW
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 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'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'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.
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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