Correlation Between San Fang and Dow Jones
Can any of the company-specific risk be diversified away by investing in both San Fang 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 San Fang and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between San Fang Chemical and Dow Jones Industrial, you can compare the effects of market volatilities on San Fang 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 San Fang with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Fang and Dow Jones.
Diversification Opportunities for San Fang and Dow Jones
Very weak diversification
The 3 months correlation between San and Dow is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding San Fang Chemical 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 San Fang 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 San Fang Chemical 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 San Fang i.e., San Fang and Dow Jones go up and down completely randomly.
Pair Corralation between San Fang and Dow Jones
Assuming the 90 days trading horizon San Fang Chemical is expected to generate 3.38 times more return on investment than Dow Jones. However, San Fang is 3.38 times more volatile than Dow Jones Industrial. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.15 per unit of risk. If you would invest 2,420 in San Fang Chemical on September 1, 2024 and sell it today you would earn a total of 1,600 from holding San Fang Chemical or generate 66.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.88% |
| Values | Daily Returns |
San Fang Chemical vs. Dow Jones Industrial
Performance |
| Timeline |
San Fang and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
San Fang Chemical
Pair trading matchups for San Fang
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with San Fang and Dow Jones
The main advantage of trading using opposite San Fang and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if San Fang 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.| San Fang vs. Asia Polymer Corp | San Fang vs. Taiwan Styrene Monomer | San Fang vs. UPC Technology Corp | San Fang vs. USI Corp |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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