Correlation Between Korea Real and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Korea Real 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 Korea Real and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Real Estate and Dow Jones Industrial, you can compare the effects of market volatilities on Korea Real 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 Korea Real with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Real and Dow Jones.
Diversification Opportunities for Korea Real and Dow Jones
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Korea and Dow is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Korea Real Estate 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 Korea Real 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 Korea Real Estate 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 Korea Real i.e., Korea Real and Dow Jones go up and down completely randomly.
Pair Corralation between Korea Real and Dow Jones
Assuming the 90 days trading horizon Korea Real Estate is expected to under-perform the Dow Jones. But the stock apears to be less risky and, when comparing its historical volatility, Korea Real Estate is 1.83 times less risky than Dow Jones. The stock trades about -0.23 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 4,251,495 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 135,540 from holding Dow Jones Industrial or generate 3.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Real Estate vs. Dow Jones Industrial
Performance |
| Timeline |
Korea Real and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Korea Real Estate
Pair trading matchups for Korea Real
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Korea Real and Dow Jones
The main advantage of trading using opposite Korea Real and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Real 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.| Korea Real vs. Samsung Electronics Co | Korea Real vs. Samsung Electronics Co | Korea Real vs. LG Energy Solution | Korea Real vs. SK Hynix |
| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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