Correlation Between Dow Jones and Weichai Heavy
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By analyzing existing cross correlation between Dow Jones Industrial and Weichai Heavy Machinery, you can compare the effects of market volatilities on Dow Jones and Weichai Heavy 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 Dow Jones with a short position of Weichai Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Weichai Heavy.
Diversification Opportunities for Dow Jones and Weichai Heavy
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Weichai is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Weichai Heavy Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weichai Heavy Machinery and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Weichai Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weichai Heavy Machinery has no effect on the direction of Dow Jones i.e., Dow Jones and Weichai Heavy go up and down completely randomly.
Pair Corralation between Dow Jones and Weichai Heavy
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.45 times less return on investment than Weichai Heavy. But when comparing it to its historical volatility, Dow Jones Industrial is 5.61 times less risky than Weichai Heavy. It trades about 0.27 of its potential returns per unit of risk. Weichai Heavy Machinery is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,118 in Weichai Heavy Machinery on August 28, 2024 and sell it today you would earn a total of 131.00 from holding Weichai Heavy Machinery or generate 11.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Weichai Heavy Machinery
Performance |
| Timeline |
Dow Jones and Weichai Heavy Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Weichai Heavy Machinery
Pair trading matchups for Weichai Heavy
Pair Trading with Dow Jones and Weichai Heavy
The main advantage of trading using opposite Dow Jones and Weichai Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Weichai Heavy 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 Weichai Heavy will offset losses from the drop in Weichai Heavy's long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| Weichai Heavy vs. China Asset Management | Weichai Heavy vs. Harvest Fund Management | Weichai Heavy vs. JCHX Mining Management | Weichai Heavy vs. AVIC Fund Management |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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