Correlation Between Hong Leong and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Hong Leong 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 Hong Leong and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hong Leong Financial and Dow Jones Industrial, you can compare the effects of market volatilities on Hong Leong 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 Hong Leong with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Leong and Dow Jones.
Diversification Opportunities for Hong Leong and Dow Jones
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hong and Dow is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Hong Leong Financial 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 Hong Leong 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 Hong Leong Financial 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 Hong Leong i.e., Hong Leong and Dow Jones go up and down completely randomly.
Pair Corralation between Hong Leong and Dow Jones
Assuming the 90 days trading horizon Hong Leong is expected to generate 3.1 times less return on investment than Dow Jones. In addition to that, Hong Leong is 1.32 times more volatile than Dow Jones Industrial. It trades about 0.02 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.09 per unit of volatility. If you would invest 3,389,102 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 1,040,549 from holding Dow Jones Industrial or generate 30.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.8% |
| Values | Daily Returns |
Hong Leong Financial vs. Dow Jones Industrial
Performance |
| Timeline |
Hong Leong and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Hong Leong Financial
Pair trading matchups for Hong Leong
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Hong Leong and Dow Jones
The main advantage of trading using opposite Hong Leong and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Leong 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.| Hong Leong vs. Kluang Rubber | Hong Leong vs. Homeritz Bhd | Hong Leong vs. DC HEALTHCARE HOLDINGS | Hong Leong vs. YX Precious Metals |
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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