Correlation Between Dow Jones and Ten Ren
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Ten Ren 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 Ten Ren 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 Ten Ren Tea, you can compare the effects of market volatilities on Dow Jones and Ten Ren 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 Ten Ren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Ten Ren.
Diversification Opportunities for Dow Jones and Ten Ren
Very good diversification
The 3 months correlation between Dow and Ten is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Ten Ren Tea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ten Ren Tea 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 Ten Ren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ten Ren Tea has no effect on the direction of Dow Jones i.e., Dow Jones and Ten Ren go up and down completely randomly.
Pair Corralation between Dow Jones and Ten Ren
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.98 times more return on investment than Ten Ren. However, Dow Jones is 1.98 times more volatile than Ten Ren Tea. It trades about 0.37 of its potential returns per unit of risk. Ten Ren Tea is currently generating about -0.26 per unit of risk. If you would invest 4,179,460 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 298,740 from holding Dow Jones Industrial or generate 7.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Dow Jones Industrial vs. Ten Ren Tea
Performance |
| Timeline |
Dow Jones and Ten Ren Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Ten Ren Tea
Pair trading matchups for Ten Ren
Pair Trading with Dow Jones and Ten Ren
The main advantage of trading using opposite Dow Jones and Ten Ren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Ten Ren 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 Ten Ren will offset losses from the drop in Ten Ren's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| Ten Ren vs. Standard Foods Corp | Ten Ren vs. TTET Union Corp | Ten Ren vs. Great Wall Enterprise | Ten Ren vs. Lian Hwa Foods |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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