Correlation Between Japanese Small and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Japanese Small 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 Japanese Small and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japanese Small Pany and Dow Jones Industrial, you can compare the effects of market volatilities on Japanese Small 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 Japanese Small with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japanese Small and Dow Jones.
Diversification Opportunities for Japanese Small and Dow Jones
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Japanese and Dow is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Japanese Small Pany 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 Japanese Small 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 Japanese Small Pany 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 Japanese Small i.e., Japanese Small and Dow Jones go up and down completely randomly.
Pair Corralation between Japanese Small and Dow Jones
Assuming the 90 days horizon Japanese Small is expected to generate 1.58 times less return on investment than Dow Jones. In addition to that, Japanese Small is 1.49 times more volatile than Dow Jones Industrial. It trades about 0.05 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.13 per unit of volatility. If you would invest 3,624,787 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 853,413 from holding Dow Jones Industrial or generate 23.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japanese Small Pany vs. Dow Jones Industrial
Performance |
| Timeline |
Japanese Small and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Japanese Small Pany
Pair trading matchups for Japanese Small
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Japanese Small and Dow Jones
The main advantage of trading using opposite Japanese Small and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japanese Small 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.| Japanese Small vs. Wilmington Funds | Japanese Small vs. Schwab Treasury Money | Japanese Small vs. Wt Mutual Fund | Japanese Small vs. Matson Money Equity |
| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
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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