Correlation Between Great Wall and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Great Wall 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 Great Wall and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Wall Enterprise and Dow Jones Industrial, you can compare the effects of market volatilities on Great Wall 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 Great Wall with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Dow Jones.
Diversification Opportunities for Great Wall and Dow Jones
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Great and Dow is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise 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 Great Wall 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 Great Wall Enterprise 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 Great Wall i.e., Great Wall and Dow Jones go up and down completely randomly.
Pair Corralation between Great Wall and Dow Jones
Assuming the 90 days trading horizon Great Wall Enterprise is expected to under-perform the Dow Jones. In addition to that, Great Wall is 1.13 times more volatile than Dow Jones Industrial. It trades about -0.1 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.17 per unit of volatility. If you would invest 4,329,703 in Dow Jones Industrial on October 26, 2024 and sell it today you would earn a total of 112,722 from holding Dow Jones Industrial or generate 2.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Great Wall Enterprise vs. Dow Jones Industrial
Performance |
| Timeline |
Great Wall and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Great Wall Enterprise
Pair trading matchups for Great Wall
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Great Wall and Dow Jones
The main advantage of trading using opposite Great Wall and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall 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.| Great Wall vs. Charoen Pokphand Enterprise | Great Wall vs. Uni President Enterprises Corp | Great Wall vs. Lien Hwa Industrial | Great Wall vs. Standard Foods Corp |
| Dow Jones vs. Asure Software | Dow Jones vs. Amkor Technology | Dow Jones vs. Radcom | Dow Jones vs. Senmiao Technology |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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