Correlation Between Sports Gear and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Sports Gear 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 Sports Gear and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sports Gear Co and Dow Jones Industrial, you can compare the effects of market volatilities on Sports Gear 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 Sports Gear with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sports Gear and Dow Jones.
Diversification Opportunities for Sports Gear and Dow Jones
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sports and Dow is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sports Gear 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 Sports Gear 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 Sports Gear 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 Sports Gear i.e., Sports Gear and Dow Jones go up and down completely randomly.
Pair Corralation between Sports Gear and Dow Jones
Assuming the 90 days trading horizon Sports Gear Co is expected to generate 3.4 times more return on investment than Dow Jones. However, Sports Gear is 3.4 times more volatile than Dow Jones Industrial. It trades about 0.16 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.13 per unit of risk. If you would invest 6,246 in Sports Gear Co on August 25, 2024 and sell it today you would earn a total of 8,504 from holding Sports Gear Co or generate 136.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.6% |
| Values | Daily Returns |
Sports Gear Co vs. Dow Jones Industrial
Performance |
| Timeline |
Sports Gear and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Sports Gear Co
Pair trading matchups for Sports Gear
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Sports Gear and Dow Jones
The main advantage of trading using opposite Sports Gear and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sports Gear 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.| Sports Gear vs. Giant Manufacturing Co | Sports Gear vs. Johnson Health Tech | Sports Gear vs. Power Wind Health |
| 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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