Correlation Between Bank of New York and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Bank of New York 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 Bank of New York and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Banc Corp and Dow Jones Industrial, you can compare the effects of market volatilities on Bank of New York 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 Bank of New York with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of New York and Dow Jones.
Diversification Opportunities for Bank of New York and Dow Jones
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Dow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Banc 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 Bank of New York 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 Canadian Banc 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 Bank of New York i.e., Bank of New York and Dow Jones go up and down completely randomly.
Pair Corralation between Bank of New York and Dow Jones
Assuming the 90 days horizon Bank of New York is expected to generate 1.34 times less return on investment than Dow Jones. In addition to that, Bank of New York is 1.44 times more volatile than Dow Jones Industrial. It trades about 0.04 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of volatility. If you would invest 3,359,634 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 1,070,017 from holding Dow Jones Industrial or generate 31.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Canadian Banc Corp vs. Dow Jones Industrial
Performance |
| Timeline |
Bank of New York and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Canadian Banc Corp
Pair trading matchups for Bank of New York
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Bank of New York and Dow Jones
The main advantage of trading using opposite Bank of New York and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of New York 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.| Bank of New York vs. Financial 15 Split | Bank of New York vs. Life Banc Split | Bank of New York vs. Global Dividend Growth | Bank of New York vs. Brompton Split Banc |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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