Correlation Between Baxter International and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Baxter International 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 Baxter International and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baxter International and Dow Jones Industrial, you can compare the effects of market volatilities on Baxter International 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 Baxter International with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baxter International and Dow Jones.
Diversification Opportunities for Baxter International and Dow Jones
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Baxter and Dow is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International 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 Baxter International 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 Baxter International 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 Baxter International i.e., Baxter International and Dow Jones go up and down completely randomly.
Pair Corralation between Baxter International and Dow Jones
Assuming the 90 days trading horizon Baxter International is expected to generate 2.01 times more return on investment than Dow Jones. However, Baxter International is 2.01 times more volatile than Dow Jones Industrial. It trades about 0.21 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.14 per unit of risk. If you would invest 58,861 in Baxter International on October 25, 2024 and sell it today you would earn a total of 4,139 from holding Baxter International or generate 7.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Baxter International vs. Dow Jones Industrial
Performance |
| Timeline |
Baxter International and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Baxter International
Pair trading matchups for Baxter International
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Baxter International and Dow Jones
The main advantage of trading using opposite Baxter International and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baxter International 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.| Baxter International vs. UnitedHealth Group Incorporated | Baxter International vs. Grupo Sports World | Baxter International vs. The Home Depot | Baxter International vs. FIBRA Storage |
| Dow Jones vs. Xiabuxiabu Catering Management | Dow Jones vs. Neogen | Dow Jones vs. Orion Office Reit | Dow Jones vs. Bassett Furniture Industries |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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