Correlation Between Belite Bio and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Belite Bio 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 Belite Bio and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Belite Bio ADR and Dow Jones Industrial, you can compare the effects of market volatilities on Belite Bio 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 Belite Bio with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Belite Bio and Dow Jones.
Diversification Opportunities for Belite Bio and Dow Jones
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Belite and Dow is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Belite Bio ADR 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 Belite Bio 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 Belite Bio ADR 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 Belite Bio i.e., Belite Bio and Dow Jones go up and down completely randomly.
Pair Corralation between Belite Bio and Dow Jones
Given the investment horizon of 90 days Belite Bio ADR is expected to generate 4.2 times more return on investment than Dow Jones. However, Belite Bio is 4.2 times more volatile than Dow Jones Industrial. It trades about 0.08 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 4,885 in Belite Bio ADR on September 1, 2024 and sell it today you would earn a total of 1,441 from holding Belite Bio ADR or generate 29.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Belite Bio ADR vs. Dow Jones Industrial
Performance |
| Timeline |
Belite Bio and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Belite Bio ADR
Pair trading matchups for Belite Bio
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Belite Bio and Dow Jones
The main advantage of trading using opposite Belite Bio and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Belite Bio 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.| Belite Bio vs. Anebulo Pharmaceuticals | Belite Bio vs. Mineralys Therapeutics, Common | Belite Bio vs. AN2 Therapeutics | Belite Bio vs. Aerovate Therapeutics |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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