Correlation Between Dow Jones and Keyang Electric
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Keyang Electric 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 Keyang Electric 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 Keyang Electric Machinery, you can compare the effects of market volatilities on Dow Jones and Keyang Electric 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 Keyang Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Keyang Electric.
Diversification Opportunities for Dow Jones and Keyang Electric
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Keyang is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Keyang Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyang Electric 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 Keyang Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyang Electric Machinery has no effect on the direction of Dow Jones i.e., Dow Jones and Keyang Electric go up and down completely randomly.
Pair Corralation between Dow Jones and Keyang Electric
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.3 times more return on investment than Keyang Electric. However, Dow Jones Industrial is 3.33 times less risky than Keyang Electric. It trades about 0.08 of its potential returns per unit of risk. Keyang Electric Machinery is currently generating about -0.03 per unit of risk. If you would invest 3,369,685 in Dow Jones Industrial on November 7, 2024 and sell it today you would earn a total of 1,085,919 from holding Dow Jones Industrial or generate 32.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.76% |
| Values | Daily Returns |
Dow Jones Industrial vs. Keyang Electric Machinery
Performance |
| Timeline |
Dow Jones and Keyang Electric Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Keyang Electric Machinery
Pair trading matchups for Keyang Electric
Pair Trading with Dow Jones and Keyang Electric
The main advantage of trading using opposite Dow Jones and Keyang Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Keyang Electric 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 Keyang Electric will offset losses from the drop in Keyang Electric's long position.| Dow Jones vs. Mako Mining Corp | Dow Jones vs. Reyna Silver Corp | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Trupanion |
| Keyang Electric vs. Nable Communications | Keyang Electric vs. Lotte Non Life Insurance | Keyang Electric vs. LG Display Co | Keyang Electric vs. Daishin Information Communications |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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