Correlation Between Caribbean Utilities and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Caribbean Utilities 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 Caribbean Utilities and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caribbean Utilities and Dow Jones Industrial, you can compare the effects of market volatilities on Caribbean Utilities 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 Caribbean Utilities with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caribbean Utilities and Dow Jones.
Diversification Opportunities for Caribbean Utilities and Dow Jones
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caribbean and Dow is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Caribbean Utilities 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 Caribbean Utilities 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 Caribbean Utilities 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 Caribbean Utilities i.e., Caribbean Utilities and Dow Jones go up and down completely randomly.
Pair Corralation between Caribbean Utilities and Dow Jones
Assuming the 90 days trading horizon Caribbean Utilities is expected to under-perform the Dow Jones. In addition to that, Caribbean Utilities is 1.06 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 0.26 per unit of volatility. If you would invest 4,238,757 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 234,900 from holding Dow Jones Industrial or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Caribbean Utilities vs. Dow Jones Industrial
Performance |
| Timeline |
Caribbean Utilities and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Caribbean Utilities
Pair trading matchups for Caribbean Utilities
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Caribbean Utilities and Dow Jones
The main advantage of trading using opposite Caribbean Utilities and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caribbean Utilities 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.| Caribbean Utilities vs. Telus Corp | Caribbean Utilities vs. Enbridge | Caribbean Utilities vs. Algonquin Power Utilities | Caribbean Utilities vs. BCE Inc |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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