Correlation Between Wider Planet and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Wider Planet 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 Wider Planet and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wider Planet and Dow Jones Industrial, you can compare the effects of market volatilities on Wider Planet 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 Wider Planet with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wider Planet and Dow Jones.
Diversification Opportunities for Wider Planet and Dow Jones
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wider and Dow is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Wider Planet 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 Wider Planet 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 Wider Planet 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 Wider Planet i.e., Wider Planet and Dow Jones go up and down completely randomly.
Pair Corralation between Wider Planet and Dow Jones
Assuming the 90 days trading horizon Wider Planet is expected to generate 4.03 times more return on investment than Dow Jones. However, Wider Planet is 4.03 times more volatile than Dow Jones Industrial. It trades about 0.1 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 1,719,000 in Wider Planet on September 2, 2024 and sell it today you would earn a total of 129,000 from holding Wider Planet or generate 7.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Wider Planet vs. Dow Jones Industrial
Performance |
| Timeline |
Wider Planet and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Wider Planet
Pair trading matchups for Wider Planet
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Wider Planet and Dow Jones
The main advantage of trading using opposite Wider Planet and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wider Planet 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.| Wider Planet vs. Foodnamoo | Wider Planet vs. Organic Special Pet | Wider Planet vs. Digital Power Communications | Wider Planet vs. FoodNamoo |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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