Correlation Between Advanced Energy and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Advanced Energy 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 Advanced Energy and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Energy Industries and Dow Jones Industrial, you can compare the effects of market volatilities on Advanced Energy 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 Advanced Energy with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and Dow Jones.
Diversification Opportunities for Advanced Energy and Dow Jones
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Advanced and Dow is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Industries 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 Advanced Energy 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 Advanced Energy Industries 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 Advanced Energy i.e., Advanced Energy and Dow Jones go up and down completely randomly.
Pair Corralation between Advanced Energy and Dow Jones
Given the investment horizon of 90 days Advanced Energy Industries is expected to generate 1.98 times more return on investment than Dow Jones. However, Advanced Energy is 1.98 times more volatile than Dow Jones Industrial. It trades about 0.2 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 per unit of risk. If you would invest 10,828 in Advanced Energy Industries on August 28, 2024 and sell it today you would earn a total of 907.00 from holding Advanced Energy Industries or generate 8.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Energy Industries vs. Dow Jones Industrial
Performance |
| Timeline |
Advanced Energy and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Advanced Energy Industries
Pair trading matchups for Advanced Energy
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Advanced Energy and Dow Jones
The main advantage of trading using opposite Advanced Energy and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Energy 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.| Advanced Energy vs. MKS Instruments | Advanced Energy vs. Axcelis Technologies | Advanced Energy vs. Entegris | Advanced Energy vs. Cohu Inc |
| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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