Correlation Between Dow Jones and Fubon SP
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Fubon SP 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 Fubon SP 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 Fubon SP Preferred, you can compare the effects of market volatilities on Dow Jones and Fubon SP 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 Fubon SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Fubon SP.
Diversification Opportunities for Dow Jones and Fubon SP
Very weak diversification
The 3 months correlation between Dow and Fubon is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Fubon SP Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon SP Preferred 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 Fubon SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon SP Preferred has no effect on the direction of Dow Jones i.e., Dow Jones and Fubon SP go up and down completely randomly.
Pair Corralation between Dow Jones and Fubon SP
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.47 times more return on investment than Fubon SP. However, Dow Jones is 1.47 times more volatile than Fubon SP Preferred. It trades about 0.11 of its potential returns per unit of risk. Fubon SP Preferred is currently generating about 0.06 per unit of risk. If you would invest 3,428,864 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 1,044,793 from holding Dow Jones Industrial or generate 30.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.74% |
| Values | Daily Returns |
Dow Jones Industrial vs. Fubon SP Preferred
Performance |
| Timeline |
Dow Jones and Fubon SP Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Fubon SP Preferred
Pair trading matchups for Fubon SP
Pair Trading with Dow Jones and Fubon SP
The main advantage of trading using opposite Dow Jones and Fubon SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Fubon SP 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 Fubon SP will offset losses from the drop in Fubon SP'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 |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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