Correlation Between BT Group and Dow Jones
Can any of the company-specific risk be diversified away by investing in both BT Group 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 BT Group and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BT Group Plc and Dow Jones Industrial, you can compare the effects of market volatilities on BT Group 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 BT Group with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of BT Group and Dow Jones.
Diversification Opportunities for BT Group and Dow Jones
Modest diversification
The 3 months correlation between BT-A and Dow is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding BT Group Plc 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 BT Group 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 BT Group Plc 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 BT Group i.e., BT Group and Dow Jones go up and down completely randomly.
Pair Corralation between BT Group and Dow Jones
Assuming the 90 days trading horizon BT Group Plc is expected to generate 2.17 times more return on investment than Dow Jones. However, BT Group is 2.17 times more volatile than Dow Jones Industrial. It trades about 0.23 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.25 per unit of risk. If you would invest 14,280 in BT Group Plc on August 29, 2024 and sell it today you would earn a total of 1,570 from holding BT Group Plc or generate 10.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BT Group Plc vs. Dow Jones Industrial
Performance |
| Timeline |
BT Group and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
BT Group Plc
Pair trading matchups for BT Group
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with BT Group and Dow Jones
The main advantage of trading using opposite BT Group and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BT Group 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.| BT Group vs. FC Investment Trust | BT Group vs. Coor Service Management | BT Group vs. STMicroelectronics NV | BT Group vs. Hansa Investment |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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