Correlation Between Central Japan and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Central Japan 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 Central Japan and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Japan Railway and Dow Jones Industrial, you can compare the effects of market volatilities on Central Japan 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 Central Japan with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Japan and Dow Jones.
Diversification Opportunities for Central Japan and Dow Jones
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Central and Dow is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Central Japan Railway 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 Central Japan 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 Central Japan Railway 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 Central Japan i.e., Central Japan and Dow Jones go up and down completely randomly.
Pair Corralation between Central Japan and Dow Jones
Assuming the 90 days horizon Central Japan Railway is expected to under-perform the Dow Jones. In addition to that, Central Japan is 1.4 times more volatile than Dow Jones Industrial. It trades about -0.23 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.17 per unit of volatility. If you would invest 4,233,015 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 253,016 from holding Dow Jones Industrial or generate 5.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Japan Railway vs. Dow Jones Industrial
Performance |
| Timeline |
Central Japan and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Central Japan Railway
Pair trading matchups for Central Japan
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Central Japan and Dow Jones
The main advantage of trading using opposite Central Japan and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Japan 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.| Central Japan vs. West Japan Railway | Central Japan vs. LB Foster | Central Japan vs. East Japan Railway | Central Japan vs. Canadian National Railway |
| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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