Correlation Between Dow Jones and Lion Chemtech
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Lion Chemtech 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 Lion Chemtech 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 Lion Chemtech Co, you can compare the effects of market volatilities on Dow Jones and Lion Chemtech 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 Lion Chemtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Lion Chemtech.
Diversification Opportunities for Dow Jones and Lion Chemtech
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Lion is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Lion Chemtech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Chemtech 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 Lion Chemtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Chemtech has no effect on the direction of Dow Jones i.e., Dow Jones and Lion Chemtech go up and down completely randomly.
Pair Corralation between Dow Jones and Lion Chemtech
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.3 times more return on investment than Lion Chemtech. However, Dow Jones Industrial is 3.3 times less risky than Lion Chemtech. It trades about 0.26 of its potential returns per unit of risk. Lion Chemtech Co is currently generating about 0.04 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Lion Chemtech Co
Performance |
| Timeline |
Dow Jones and Lion Chemtech Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Lion Chemtech Co
Pair trading matchups for Lion Chemtech
Pair Trading with Dow Jones and Lion Chemtech
The main advantage of trading using opposite Dow Jones and Lion Chemtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Lion Chemtech 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 Lion Chemtech will offset losses from the drop in Lion Chemtech's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Lion Chemtech vs. CJ Seafood Corp | Lion Chemtech vs. Korea Information Communications | Lion Chemtech vs. Samlip General Foods | Lion Chemtech vs. CKH Food Health |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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