Correlation Between Dow Jones and Dongbu Steel
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Dongbu Steel 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 Dongbu Steel 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 Dongbu Steel Co, you can compare the effects of market volatilities on Dow Jones and Dongbu Steel 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 Dongbu Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Dongbu Steel.
Diversification Opportunities for Dow Jones and Dongbu Steel
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Dongbu is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Dongbu Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongbu Steel 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 Dongbu Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongbu Steel has no effect on the direction of Dow Jones i.e., Dow Jones and Dongbu Steel go up and down completely randomly.
Pair Corralation between Dow Jones and Dongbu Steel
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.4 times more return on investment than Dongbu Steel. However, Dow Jones Industrial is 2.48 times less risky than Dongbu Steel. It trades about 0.37 of its potential returns per unit of risk. Dongbu Steel Co is currently generating about -0.05 per unit of risk. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Dongbu Steel Co
Performance |
| Timeline |
Dow Jones and Dongbu Steel Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Dongbu Steel Co
Pair trading matchups for Dongbu Steel
Pair Trading with Dow Jones and Dongbu Steel
The main advantage of trading using opposite Dow Jones and Dongbu Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Dongbu Steel 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 Dongbu Steel will offset losses from the drop in Dongbu Steel's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Dongbu Steel vs. LG Chemicals | Dongbu Steel vs. POSCO Holdings | Dongbu Steel vs. Hanwha Solutions | Dongbu Steel vs. Hyundai Steel |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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