Correlation Between Butler National and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Butler National 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 Butler National and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Butler National Corp and Dow Jones Industrial, you can compare the effects of market volatilities on Butler National 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 Butler National with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Butler National and Dow Jones.
Diversification Opportunities for Butler National and Dow Jones
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Butler and Dow is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Butler National 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 Butler National 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 Butler National 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 Butler National i.e., Butler National and Dow Jones go up and down completely randomly.
Pair Corralation between Butler National and Dow Jones
Given the investment horizon of 90 days Butler National Corp is expected to generate 4.65 times more return on investment than Dow Jones. However, Butler National is 4.65 times more volatile than Dow Jones Industrial. It trades about 0.2 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.17 per unit of risk. If you would invest 107.00 in Butler National Corp on August 29, 2024 and sell it today you would earn a total of 57.00 from holding Butler National Corp or generate 53.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Butler National Corp vs. Dow Jones Industrial
Performance |
| Timeline |
Butler National and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Butler National Corp
Pair trading matchups for Butler National
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Butler National and Dow Jones
The main advantage of trading using opposite Butler National and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Butler National 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.| Butler National vs. Ballistic Recovery Systems | Butler National vs. BAB Inc | Butler National vs. Optex Systems Holdings, | Butler National vs. Smith Midland Corp |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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