Correlation Between ACE 10Y and Dow Jones
Can any of the company-specific risk be diversified away by investing in both ACE 10Y 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 ACE 10Y and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ACE 10Y KTB and Dow Jones Industrial, you can compare the effects of market volatilities on ACE 10Y 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 ACE 10Y with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACE 10Y and Dow Jones.
Diversification Opportunities for ACE 10Y and Dow Jones
Very weak diversification
The 3 months correlation between ACE and Dow is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding ACE 10Y KTB 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 ACE 10Y 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 ACE 10Y KTB 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 ACE 10Y i.e., ACE 10Y and Dow Jones go up and down completely randomly.
Pair Corralation between ACE 10Y and Dow Jones
Assuming the 90 days trading horizon ACE 10Y is expected to generate 1.76 times less return on investment than Dow Jones. But when comparing it to its historical volatility, ACE 10Y KTB is 2.28 times less risky than Dow Jones. It trades about 0.14 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,284,026 in Dow Jones Industrial on October 21, 2024 and sell it today you would earn a total of 64,757 from holding Dow Jones Industrial or generate 1.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.0% |
Values | Daily Returns |
ACE 10Y KTB vs. Dow Jones Industrial
Performance |
Timeline |
ACE 10Y and Dow Jones Volatility Contrast
Predicted Return Density |
Returns |
ACE 10Y KTB
Pair trading matchups for ACE 10Y
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with ACE 10Y and Dow Jones
The main advantage of trading using opposite ACE 10Y and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACE 10Y 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.ACE 10Y vs. Samsung Asset Management | ACE 10Y vs. Samsung Kodex Korea | ACE 10Y vs. Shinhan Dollar Index | ACE 10Y vs. KIM KINDEX SP500 |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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