Correlation Between Eden and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Eden 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 Eden and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eden Inc Bhd and Dow Jones Industrial, you can compare the effects of market volatilities on Eden 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 Eden with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eden and Dow Jones.
Diversification Opportunities for Eden and Dow Jones
Very good diversification
The 3 months correlation between Eden and Dow is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Eden Inc Bhd 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 Eden 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 Eden Inc Bhd 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 Eden i.e., Eden and Dow Jones go up and down completely randomly.
Pair Corralation between Eden and Dow Jones
Assuming the 90 days trading horizon Eden Inc Bhd is expected to generate 4.57 times more return on investment than Dow Jones. However, Eden is 4.57 times more volatile than Dow Jones Industrial. It trades about 0.09 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 14.00 in Eden Inc Bhd on September 2, 2024 and sell it today you would earn a total of 1.00 from holding Eden Inc Bhd or generate 7.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Eden Inc Bhd vs. Dow Jones Industrial
Performance |
| Timeline |
Eden and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Eden Inc Bhd
Pair trading matchups for Eden
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Eden and Dow Jones
The main advantage of trading using opposite Eden and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eden 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.| Eden vs. Malayan Banking Bhd | Eden vs. Public Bank Bhd | Eden vs. Petronas Chemicals Group | Eden vs. Tenaga Nasional Bhd |
| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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