Correlation Between China Everbright and Dow Jones
Can any of the company-specific risk be diversified away by investing in both China Everbright 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 Everbright 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 Everbright Bank and Dow Jones Industrial, you can compare the effects of market volatilities on China Everbright 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 Everbright with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Everbright and Dow Jones.
Diversification Opportunities for China Everbright and Dow Jones
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Dow is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding China Everbright Bank 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 Everbright 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 Everbright Bank 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 Everbright i.e., China Everbright and Dow Jones go up and down completely randomly.
Pair Corralation between China Everbright and Dow Jones
If you would invest 4,251,495 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 135,540 from holding Dow Jones Industrial or generate 3.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Everbright Bank vs. Dow Jones Industrial
Performance |
| Timeline |
China Everbright and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
China Everbright Bank
Pair trading matchups for China Everbright
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with China Everbright and Dow Jones
The main advantage of trading using opposite China Everbright and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Everbright 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 Everbright vs. China Merchants Bank | China Everbright vs. China Merchants Bank | China Everbright vs. Postal Savings Bank | China Everbright vs. China Citic Bank |
| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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