Correlation Between Automotive Finco and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Automotive Finco 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 Automotive Finco and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automotive Finco Corp and Dow Jones Industrial, you can compare the effects of market volatilities on Automotive Finco 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 Automotive Finco with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automotive Finco and Dow Jones.
Diversification Opportunities for Automotive Finco and Dow Jones
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Automotive and Dow is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Automotive Finco 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 Automotive Finco 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 Automotive Finco 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 Automotive Finco i.e., Automotive Finco and Dow Jones go up and down completely randomly.
Pair Corralation between Automotive Finco and Dow Jones
Assuming the 90 days trading horizon Automotive Finco is expected to generate 1.01 times less return on investment than Dow Jones. In addition to that, Automotive Finco is 3.85 times more volatile than Dow Jones Industrial. It trades about 0.09 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.36 per unit of volatility. If you would invest 4,179,460 in Dow Jones Industrial on September 4, 2024 and sell it today you would earn a total of 298,740 from holding Dow Jones Industrial or generate 7.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Automotive Finco Corp vs. Dow Jones Industrial
Performance |
| Timeline |
Automotive Finco and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Automotive Finco Corp
Pair trading matchups for Automotive Finco
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Automotive Finco and Dow Jones
The main advantage of trading using opposite Automotive Finco and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automotive Finco 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.| Automotive Finco vs. Slate Grocery REIT | Automotive Finco vs. Roots Corp | Automotive Finco vs. Aimia Inc | Automotive Finco vs. Morguard Real Estate |
| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
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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