Correlation Between Big Ridge and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Big Ridge 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 Big Ridge and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Ridge Gold and Dow Jones Industrial, you can compare the effects of market volatilities on Big Ridge 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 Big Ridge with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Ridge and Dow Jones.
Diversification Opportunities for Big Ridge and Dow Jones
Good diversification
The 3 months correlation between Big and Dow is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Big Ridge Gold 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 Big Ridge 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 Big Ridge Gold 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 Big Ridge i.e., Big Ridge and Dow Jones go up and down completely randomly.
Pair Corralation between Big Ridge and Dow Jones
Assuming the 90 days horizon Big Ridge Gold is expected to under-perform the Dow Jones. In addition to that, Big Ridge is 12.34 times more volatile than Dow Jones Industrial. It trades about -0.15 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.34 per unit of volatility. If you would invest 4,239,227 in Dow Jones Industrial on November 3, 2024 and sell it today you would earn a total of 215,239 from holding Dow Jones Industrial or generate 5.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big Ridge Gold vs. Dow Jones Industrial
Performance |
| Timeline |
Big Ridge and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Big Ridge Gold
Pair trading matchups for Big Ridge
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Big Ridge and Dow Jones
The main advantage of trading using opposite Big Ridge and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Ridge 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.| Big Ridge vs. Minnova Corp | Big Ridge vs. Argo Gold | Big Ridge vs. Advance Gold Corp | Big Ridge vs. Blue Star Gold |
| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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