Correlation Between Jeju Bank and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Jeju Bank 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 Jeju Bank and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jeju Bank and Dow Jones Industrial, you can compare the effects of market volatilities on Jeju Bank 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 Jeju Bank with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeju Bank and Dow Jones.
Diversification Opportunities for Jeju Bank and Dow Jones
Pay attention - limited upside
The 3 months correlation between Jeju and Dow is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Bank 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 Jeju Bank 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 Jeju Bank 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 Jeju Bank i.e., Jeju Bank and Dow Jones go up and down completely randomly.
Pair Corralation between Jeju Bank and Dow Jones
Assuming the 90 days trading horizon Jeju Bank is expected to generate 7.19 times more return on investment than Dow Jones. However, Jeju Bank is 7.19 times more volatile than Dow Jones Industrial. It trades about 0.02 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 981,999 in Jeju Bank on August 25, 2024 and sell it today you would lose (173,999) from holding Jeju Bank or give up 17.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.38% |
| Values | Daily Returns |
Jeju Bank vs. Dow Jones Industrial
Performance |
| Timeline |
Jeju Bank and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Jeju Bank
Pair trading matchups for Jeju Bank
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Jeju Bank and Dow Jones
The main advantage of trading using opposite Jeju Bank and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jeju Bank 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.| Jeju Bank vs. Youngbo Chemical Co | Jeju Bank vs. Next Entertainment World | Jeju Bank vs. Tamul Multimedia Co | Jeju Bank vs. Dongnam Chemical Co |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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