Correlation Between Dow Jones and KPX Chemical
Can any of the company-specific risk be diversified away by investing in both Dow Jones and KPX Chemical 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 KPX Chemical 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 KPX Chemical, you can compare the effects of market volatilities on Dow Jones and KPX Chemical 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 KPX Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and KPX Chemical.
Diversification Opportunities for Dow Jones and KPX Chemical
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and KPX is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and KPX Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KPX Chemical 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 KPX Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KPX Chemical has no effect on the direction of Dow Jones i.e., Dow Jones and KPX Chemical go up and down completely randomly.
Pair Corralation between Dow Jones and KPX Chemical
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.43 times more return on investment than KPX Chemical. However, Dow Jones Industrial is 2.32 times less risky than KPX Chemical. It trades about 0.05 of its potential returns per unit of risk. KPX Chemical is currently generating about -0.13 per unit of risk. If you would invest 4,391,098 in Dow Jones Industrial on September 13, 2024 and sell it today you would earn a total of 23,758 from holding Dow Jones Industrial or generate 0.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. KPX Chemical
Performance |
| Timeline |
Dow Jones and KPX Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
KPX Chemical
Pair trading matchups for KPX Chemical
Pair Trading with Dow Jones and KPX Chemical
The main advantage of trading using opposite Dow Jones and KPX Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, KPX Chemical 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 KPX Chemical will offset losses from the drop in KPX Chemical's long position.| Dow Jones vs. ChampionX | Dow Jones vs. Highway Holdings Limited | Dow Jones vs. Westinghouse Air Brake | Dow Jones vs. Cementos Pacasmayo SAA |
| KPX Chemical vs. ITM Semiconductor Co | KPX Chemical vs. Dgb Financial | KPX Chemical vs. CJ Seafood Corp | KPX Chemical vs. Sewoon Medical Co |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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