# Correlation Between Eaton Vance and DOW

By analyzing existing cross correlation between Eaton Vance Multi-Strategy and DOW, you can compare the effects of market volatilities on Eaton Vance 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 Eaton Vance with a short position of DOW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and DOW.

### Specify exactly 2 symbols:EAAMX^DJIAdd Two Equities

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

## Diversification Opportunities for Eaton Vance and DOW

 0.43 Correlation Coefficient Eaton Vance Multi-St DOW

### Very weak diversification

The 3 months correlation between Eaton and DOW is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Multi-Strategy and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW and Eaton Vance 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 Eaton Vance Multi-Strategy 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 Eaton Vance i.e., Eaton Vance and DOW go up and down completely randomly.

## Pair Corralation between Eaton Vance and DOW

Assuming the 90 days horizon Eaton Vance is expected to generate 8.07 times less return on investment than DOW. But when comparing it to its historical volatility, Eaton Vance Multi-Strategy is 4.0 times less risky than DOW. It trades about 0.02 of its potential returns per unit of risk. DOW is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,839,981  in DOW on October 23, 2021 and sell it today you would earn a total of  631,558  from holding DOW or generate 22.24% return on investment over 90 days.
 Time Period 3 Months [change] Direction Moves Together Strength Weak Accuracy 100.0% Values Daily Returns

## Eaton Vance Multi-Strategy  vs.  DOW

 Performance (%)
 Timeline

## Eaton Vance and DOW Volatility Contrast

 Predicted Return Density
 Returns

## DOW

### Pair trading matchups for DOW

 Fidelity 500 vs. DOW Advantage Solutions vs. DOW Alphabet vs. DOW Fidelity International vs. DOW Boston Omaha vs. DOW FTSE EM vs. DOW Fidelity Total vs. DOW Citigroup vs. DOW Total Stock vs. DOW Visa vs. DOW Total Intl 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 Eaton Vance and DOW

The main advantage of trading using opposite Eaton Vance and DOW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Vance 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.

## Eaton Vance Multi-Strategy

### Pair trading matchups for Eaton Vance

The idea behind Eaton Vance Multi-Strategy 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

 Fidelity Health vs. DOW Fidelity 500 vs. DOW Fidelity Total vs. DOW GM vs. DOW Visa vs. DOW Total Stock vs. DOW FTSE EM vs. DOW Fidelity Total vs. DOW Alphabet vs. DOW Microsoft Corp vs. DOW Total Intl vs. DOW Fidelity International 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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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