Correlation Between Dow Jones and Jeju Bank
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Jeju Bank 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 Dow Jones and Jeju Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Jeju Bank, you can compare the effects of market volatilities on Dow Jones and Jeju Bank 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 Jeju Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Jeju Bank.
Diversification Opportunities for Dow Jones and Jeju Bank
Good diversification
The 3 months correlation between Dow and Jeju is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Jeju Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Bank 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 Jeju Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Bank has no effect on the direction of Dow Jones i.e., Dow Jones and Jeju Bank go up and down completely randomly.
Pair Corralation between Dow Jones and Jeju Bank
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Jeju Bank. In addition to that, Dow Jones is 1.06 times more volatile than Jeju Bank. It trades about -0.22 of its total potential returns per unit of risk. Jeju Bank is currently generating about 0.42 per unit of volatility. If you would invest 795,000 in Jeju Bank on November 27, 2024 and sell it today you would earn a total of 34,000 from holding Jeju Bank or generate 4.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 85.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Jeju Bank
Performance |
| Timeline |
Dow Jones and Jeju Bank Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Jeju Bank
Pair trading matchups for Jeju Bank
Pair Trading with Dow Jones and Jeju Bank
The main advantage of trading using opposite Dow Jones and Jeju Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Jeju Bank 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 Jeju Bank will offset losses from the drop in Jeju Bank's long position.The idea behind Dow Jones Industrial and Jeju Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Jeju Bank vs. Jin Air Co | Jeju Bank vs. ITM Semiconductor Co | Jeju Bank vs. Mirai Semiconductors Co | Jeju Bank vs. Barunson Entertainment Arts |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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