Correlation Between Dow Jones and Cathay Dow
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Cathay Dow 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 Cathay Dow 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 Cathay Dow Jones, you can compare the effects of market volatilities on Dow Jones and Cathay Dow 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 Cathay Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Cathay Dow.
Diversification Opportunities for Dow Jones and Cathay Dow
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Cathay is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Cathay Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Dow Jones 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 Cathay Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Dow Jones has no effect on the direction of Dow Jones i.e., Dow Jones and Cathay Dow go up and down completely randomly.
Pair Corralation between Dow Jones and Cathay Dow
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.02 times more return on investment than Cathay Dow. However, Dow Jones is 1.02 times more volatile than Cathay Dow Jones. It trades about 0.26 of its potential returns per unit of risk. Cathay Dow Jones is currently generating about 0.2 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 27, 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 Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Cathay Dow Jones
Performance |
| Timeline |
Dow Jones and Cathay Dow Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Cathay Dow Jones
Pair trading matchups for Cathay Dow
Pair Trading with Dow Jones and Cathay Dow
The main advantage of trading using opposite Dow Jones and Cathay Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Cathay Dow 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 Cathay Dow will offset losses from the drop in Cathay Dow's long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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