Correlation Between Dow Jones and Federated Max

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

Diversification Opportunities for Dow Jones and Federated Max

0.98

Correlation Coefficient

Dow Jones  Federated Max

Almost no diversification

The 3 months correlation between Dow and Federated is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Federated Max Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Max Cap 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 Federated Max. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Max Cap has no effect on the direction of Dow Jones i.e., Dow Jones and Federated Max go up and down completely randomly.

Pair Corralation between Dow Jones and Federated Max

Assuming the 90 days trading horizon Dow Jones is expected to generate 1.8 times less return on investment than Federated Max. In addition to that, Dow Jones is 1.07 times more volatile than Federated Max Cap Index. It trades about 0.12 of its total potential returns per unit of risk. Federated Max Cap Index is currently generating about 0.23 per unit of volatility. If you would invest  751.00  in Federated Max Cap Index on May 5, 2025 and sell it today you would earn a total of  81.00  from holding Federated Max Cap Index or generate 10.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Dow Jones Industrial  vs.  Federated Max Cap Index

Pair Trading with Dow Jones and Federated Max

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

The idea behind Dow Jones Industrial and Federated Max Cap Index 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..