Correlation Between Grand Pacific and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Grand Pacific 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 Grand Pacific and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grand Pacific Petrochemical and Dow Jones Industrial, you can compare the effects of market volatilities on Grand Pacific 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 Grand Pacific with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Pacific and Dow Jones.
Diversification Opportunities for Grand Pacific and Dow Jones
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Grand and Dow is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Grand Pacific Petrochemical 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 Grand Pacific 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 Grand Pacific Petrochemical 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 Grand Pacific i.e., Grand Pacific and Dow Jones go up and down completely randomly.
Pair Corralation between Grand Pacific and Dow Jones
Assuming the 90 days trading horizon Grand Pacific Petrochemical is expected to under-perform the Dow Jones. In addition to that, Grand Pacific is 2.05 times more volatile than Dow Jones Industrial. It trades about -0.06 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 3,363,061 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 1,110,596 from holding Dow Jones Industrial or generate 33.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 96.22% |
| Values | Daily Returns |
Grand Pacific Petrochemical vs. Dow Jones Industrial
Performance |
| Timeline |
Grand Pacific and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Grand Pacific Petrochemical
Pair trading matchups for Grand Pacific
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Grand Pacific and Dow Jones
The main advantage of trading using opposite Grand Pacific and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Pacific 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.| Grand Pacific vs. Cheng Shin Rubber | Grand Pacific vs. China Steel Chemical | Grand Pacific vs. Yulon Motor Co |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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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