Correlation Between Dow Jones and China Glaze
Can any of the company-specific risk be diversified away by investing in both Dow Jones and China Glaze 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 China Glaze 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 China Glaze Co, you can compare the effects of market volatilities on Dow Jones and China Glaze 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 China Glaze. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and China Glaze.
Diversification Opportunities for Dow Jones and China Glaze
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and China is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and China Glaze Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Glaze 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 China Glaze. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Glaze has no effect on the direction of Dow Jones i.e., Dow Jones and China Glaze go up and down completely randomly.
Pair Corralation between Dow Jones and China Glaze
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.83 times less return on investment than China Glaze. But when comparing it to its historical volatility, Dow Jones Industrial is 3.1 times less risky than China Glaze. It trades about 0.24 of its potential returns per unit of risk. China Glaze Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,140 in China Glaze Co on August 26, 2024 and sell it today you would earn a total of 190.00 from holding China Glaze Co or generate 8.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. China Glaze Co
Performance |
| Timeline |
Dow Jones and China Glaze Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
China Glaze Co
Pair trading matchups for China Glaze
Pair Trading with Dow Jones and China Glaze
The main advantage of trading using opposite Dow Jones and China Glaze positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, China Glaze 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 China Glaze will offset losses from the drop in China Glaze's long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| China Glaze vs. Cheng Shin Rubber | China Glaze vs. Taiwan Cement Corp | China Glaze vs. China Steel Chemical | China Glaze vs. Yulon Motor 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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