Correlation Between China Overseas and Dow Jones
Can any of the company-specific risk be diversified away by investing in both China Overseas 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 China Overseas and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Overseas Land and Dow Jones Industrial, you can compare the effects of market volatilities on China Overseas 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 China Overseas with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Overseas and Dow Jones.
Diversification Opportunities for China Overseas and Dow Jones
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Dow is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding China Overseas Land 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 China Overseas 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 China Overseas Land 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 China Overseas i.e., China Overseas and Dow Jones go up and down completely randomly.
Pair Corralation between China Overseas and Dow Jones
Assuming the 90 days horizon China Overseas is expected to generate 1.1 times less return on investment than Dow Jones. In addition to that, China Overseas is 8.12 times more volatile than Dow Jones Industrial. It trades about 0.01 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.11 per unit of volatility. If you would invest 3,428,864 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 1,044,793 from holding Dow Jones Industrial or generate 30.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 85.59% |
| Values | Daily Returns |
China Overseas Land vs. Dow Jones Industrial
Performance |
| Timeline |
China Overseas and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
China Overseas Land
Pair trading matchups for China Overseas
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with China Overseas and Dow Jones
The main advantage of trading using opposite China Overseas and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Overseas 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.| China Overseas vs. Sun Hung Kai | China Overseas vs. China Overseas Land | China Overseas vs. EGRNF | China Overseas vs. Sino Land Co |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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