Correlation Between Central Pacific and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Central Pacific 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 Pacific 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 Pacific Financial and Dow Jones Industrial, you can compare the effects of market volatilities on Central Pacific 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 Pacific with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Pacific and Dow Jones.
Diversification Opportunities for Central Pacific and Dow Jones
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Central and Dow is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial 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 Pacific 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 Pacific Financial 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 Pacific i.e., Central Pacific and Dow Jones go up and down completely randomly.
Pair Corralation between Central Pacific and Dow Jones
Considering the 90-day investment horizon Central Pacific Financial is expected to generate 2.62 times more return on investment than Dow Jones. However, Central Pacific is 2.62 times more volatile than Dow Jones Industrial. It trades about 0.21 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.28 per unit of risk. If you would invest 2,766 in Central Pacific Financial on November 6, 2024 and sell it today you would earn a total of 223.00 from holding Central Pacific Financial or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Pacific Financial vs. Dow Jones Industrial
Performance |
| Timeline |
Central Pacific and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Central Pacific Financial
Pair trading matchups for Central Pacific
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Central Pacific and Dow Jones
The main advantage of trading using opposite Central Pacific and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Pacific 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 Pacific vs. Bank of Hawaii | Central Pacific vs. Territorial Bancorp | Central Pacific vs. First Bancorp | Central Pacific vs. Hancock Whitney Corp |
| Dow Jones vs. Mako Mining Corp | Dow Jones vs. Reyna Silver Corp | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Trupanion |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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