Correlation Between Shanghai Construction and Dow Jones
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By analyzing existing cross correlation between Shanghai Construction Group and Dow Jones Industrial, you can compare the effects of market volatilities on Shanghai Construction 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 Shanghai Construction with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Construction and Dow Jones.
Diversification Opportunities for Shanghai Construction and Dow Jones
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Shanghai and Dow is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Construction Group 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 Shanghai Construction 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 Shanghai Construction Group 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 Shanghai Construction i.e., Shanghai Construction and Dow Jones go up and down completely randomly.
Pair Corralation between Shanghai Construction and Dow Jones
Assuming the 90 days trading horizon Shanghai Construction Group is expected to under-perform the Dow Jones. In addition to that, Shanghai Construction is 1.44 times more volatile than Dow Jones Industrial. It trades about -0.08 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.3 per unit of volatility. If you would invest 4,270,656 in Dow Jones Industrial on November 5, 2024 and sell it today you would earn a total of 183,810 from holding Dow Jones Industrial or generate 4.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 89.47% |
| Values | Daily Returns |
Shanghai Construction Group vs. Dow Jones Industrial
Performance |
| Timeline |
Shanghai Construction and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Shanghai Construction Group
Pair trading matchups for Shanghai Construction
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Shanghai Construction and Dow Jones
The main advantage of trading using opposite Shanghai Construction and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Construction 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 Shanghai Construction Group 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.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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