Correlation Between Raytheon Technologies and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Raytheon Technologies 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 Raytheon Technologies and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Raytheon Technologies Corp and Dow Jones Industrial, you can compare the effects of market volatilities on Raytheon Technologies 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 Raytheon Technologies with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and Dow Jones.
Diversification Opportunities for Raytheon Technologies and Dow Jones
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Raytheon and Dow is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp 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 Raytheon Technologies 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 Raytheon Technologies Corp 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 Raytheon Technologies i.e., Raytheon Technologies and Dow Jones go up and down completely randomly.
Pair Corralation between Raytheon Technologies and Dow Jones
Assuming the 90 days horizon Raytheon Technologies Corp is expected to generate 1.84 times more return on investment than Dow Jones. However, Raytheon Technologies is 1.84 times more volatile than Dow Jones Industrial. It trades about 0.14 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of risk. If you would invest 7,155 in Raytheon Technologies Corp on August 25, 2024 and sell it today you would earn a total of 4,285 from holding Raytheon Technologies Corp or generate 59.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.91% |
| Values | Daily Returns |
Raytheon Technologies Corp vs. Dow Jones Industrial
Performance |
| Timeline |
Raytheon Technologies and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Raytheon Technologies Corp
Pair trading matchups for Raytheon Technologies
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Raytheon Technologies and Dow Jones
The main advantage of trading using opposite Raytheon Technologies and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies 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.| Raytheon Technologies vs. Japan Medical Dynamic | Raytheon Technologies vs. TEXAS ROADHOUSE | Raytheon Technologies vs. Fukuyama Transporting Co | Raytheon Technologies vs. Microbot Medical |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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