Correlation Between Elite Material and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Elite Material 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 Elite Material and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elite Material Co and Dow Jones Industrial, you can compare the effects of market volatilities on Elite Material 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 Elite Material with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Material and Dow Jones.
Diversification Opportunities for Elite Material and Dow Jones
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Elite and Dow is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Elite Material Co 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 Elite Material 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 Elite Material Co 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 Elite Material i.e., Elite Material and Dow Jones go up and down completely randomly.
Pair Corralation between Elite Material and Dow Jones
Assuming the 90 days trading horizon Elite Material Co is expected to generate 2.18 times more return on investment than Dow Jones. However, Elite Material is 2.18 times more volatile than Dow Jones Industrial. It trades about 0.21 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.34 per unit of risk. If you would invest 42,700 in Elite Material Co on September 2, 2024 and sell it today you would earn a total of 4,150 from holding Elite Material Co or generate 9.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Elite Material Co vs. Dow Jones Industrial
Performance |
| Timeline |
Elite Material and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Elite Material Co
Pair trading matchups for Elite Material
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Elite Material and Dow Jones
The main advantage of trading using opposite Elite Material and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Material 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.The idea behind Elite Material Co and Dow Jones Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |