Correlation Between Brompton North and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Brompton North 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 Brompton North and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brompton North American and Dow Jones Industrial, you can compare the effects of market volatilities on Brompton North 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 Brompton North with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton North and Dow Jones.
Diversification Opportunities for Brompton North and Dow Jones
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Brompton and Dow is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Brompton North American 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 Brompton North 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 Brompton North American 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 Brompton North i.e., Brompton North and Dow Jones go up and down completely randomly.
Pair Corralation between Brompton North and Dow Jones
Assuming the 90 days trading horizon Brompton North American is expected to generate 1.51 times more return on investment than Dow Jones. However, Brompton North is 1.51 times more volatile than Dow Jones Industrial. It trades about 0.18 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of risk. If you would invest 2,037 in Brompton North American on September 3, 2024 and sell it today you would earn a total of 590.00 from holding Brompton North American or generate 28.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brompton North American vs. Dow Jones Industrial
Performance |
| Timeline |
Brompton North and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Brompton North American
Pair trading matchups for Brompton North
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Brompton North and Dow Jones
The main advantage of trading using opposite Brompton North and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton North 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.| Brompton North vs. Brompton Global Dividend | Brompton North vs. Tech Leaders Income | Brompton North vs. Global Healthcare Income | Brompton North vs. Brompton European Dividend |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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