Correlation Between Dow Jones and Nien Hsing
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Nien Hsing 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 Nien Hsing 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 Nien Hsing Textile, you can compare the effects of market volatilities on Dow Jones and Nien Hsing 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 Nien Hsing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Nien Hsing.
Diversification Opportunities for Dow Jones and Nien Hsing
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Nien is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Nien Hsing Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nien Hsing Textile 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 Nien Hsing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nien Hsing Textile has no effect on the direction of Dow Jones i.e., Dow Jones and Nien Hsing go up and down completely randomly.
Pair Corralation between Dow Jones and Nien Hsing
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Nien Hsing. In addition to that, Dow Jones is 1.24 times more volatile than Nien Hsing Textile. It trades about -0.22 of its total potential returns per unit of risk. Nien Hsing Textile is currently generating about 0.47 per unit of volatility. If you would invest 1,940 in Nien Hsing Textile on November 27, 2024 and sell it today you would earn a total of 75.00 from holding Nien Hsing Textile or generate 3.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 80.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Nien Hsing Textile
Performance |
| Timeline |
Dow Jones and Nien Hsing Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Nien Hsing Textile
Pair trading matchups for Nien Hsing
Pair Trading with Dow Jones and Nien Hsing
The main advantage of trading using opposite Dow Jones and Nien Hsing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Nien Hsing 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 Nien Hsing will offset losses from the drop in Nien Hsing's long position.The idea behind Dow Jones Industrial and Nien Hsing Textile pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Nien Hsing vs. Tainan Enterprises Co | Nien Hsing vs. De Licacy Industrial | Nien Hsing vs. Taiwan Styrene Monomer | Nien Hsing vs. Kaulin Mfg |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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