Correlation Between DNB BANK and Dow Jones
Can any of the company-specific risk be diversified away by investing in both DNB BANK 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 DNB BANK and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DNB BANK ASA and Dow Jones Industrial, you can compare the effects of market volatilities on DNB BANK 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 DNB BANK with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of DNB BANK and Dow Jones.
Diversification Opportunities for DNB BANK and Dow Jones
Poor diversification
The 3 months correlation between DNB and Dow is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding DNB BANK ASA 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 DNB BANK 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 DNB BANK ASA 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 DNB BANK i.e., DNB BANK and Dow Jones go up and down completely randomly.
Pair Corralation between DNB BANK and Dow Jones
Assuming the 90 days trading horizon DNB BANK ASA is expected to generate 54.93 times more return on investment than Dow Jones. However, DNB BANK is 54.93 times more volatile than Dow Jones Industrial. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 1,699 in DNB BANK ASA on August 30, 2024 and sell it today you would earn a total of 378.00 from holding DNB BANK ASA or generate 22.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.21% |
| Values | Daily Returns |
DNB BANK ASA vs. Dow Jones Industrial
Performance |
| Timeline |
DNB BANK and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
DNB BANK ASA
Pair trading matchups for DNB BANK
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with DNB BANK and Dow Jones
The main advantage of trading using opposite DNB BANK and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DNB BANK 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.| DNB BANK vs. Nufarm Limited | DNB BANK vs. HK Electric Investments | DNB BANK vs. WisdomTree Investments | DNB BANK vs. New Residential Investment |
| 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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