Correlation Between Dow Jones and Next Entertainment
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Next Entertainment 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 Next Entertainment 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 Next Entertainment World, you can compare the effects of market volatilities on Dow Jones and Next Entertainment 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 Next Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Next Entertainment.
Diversification Opportunities for Dow Jones and Next Entertainment
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Next is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Next Entertainment World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Entertainment World 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 Next Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Entertainment World has no effect on the direction of Dow Jones i.e., Dow Jones and Next Entertainment go up and down completely randomly.
Pair Corralation between Dow Jones and Next Entertainment
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.22 times more return on investment than Next Entertainment. However, Dow Jones Industrial is 4.53 times less risky than Next Entertainment. It trades about 0.12 of its potential returns per unit of risk. Next Entertainment World is currently generating about -0.08 per unit of risk. If you would invest 3,387,678 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 1,103,387 from holding Dow Jones Industrial or generate 32.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.31% |
| Values | Daily Returns |
Dow Jones Industrial vs. Next Entertainment World
Performance |
| Timeline |
Dow Jones and Next Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Next Entertainment World
Pair trading matchups for Next Entertainment
Pair Trading with Dow Jones and Next Entertainment
The main advantage of trading using opposite Dow Jones and Next Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Next Entertainment 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 Next Entertainment will offset losses from the drop in Next Entertainment's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Next Entertainment vs. AfreecaTV Co | Next Entertainment vs. Seegene | Next Entertainment vs. SS TECH | Next Entertainment vs. Busan Industrial 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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