Correlation Between Dow Jones and Hua Hong
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Hua Hong 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 Hua Hong 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 Hua Hong Semiconductor, you can compare the effects of market volatilities on Dow Jones and Hua Hong 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 Hua Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Hua Hong.
Diversification Opportunities for Dow Jones and Hua Hong
Good diversification
The 3 months correlation between Dow and Hua is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Hua Hong Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Hong Semiconductor 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 Hua Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Hong Semiconductor has no effect on the direction of Dow Jones i.e., Dow Jones and Hua Hong go up and down completely randomly.
Pair Corralation between Dow Jones and Hua Hong
Assuming the 90 days trading horizon Dow Jones is expected to generate 4.09 times less return on investment than Hua Hong. But when comparing it to its historical volatility, Dow Jones Industrial is 5.93 times less risky than Hua Hong. It trades about 0.09 of its potential returns per unit of risk. Hua Hong Semiconductor is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 236.00 in Hua Hong Semiconductor on October 25, 2024 and sell it today you would earn a total of 60.00 from holding Hua Hong Semiconductor or generate 25.42% 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. Hua Hong Semiconductor
Performance |
| Timeline |
Dow Jones and Hua Hong Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Hua Hong Semiconductor
Pair trading matchups for Hua Hong
Pair Trading with Dow Jones and Hua Hong
The main advantage of trading using opposite Dow Jones and Hua Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Hua Hong 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 Hua Hong will offset losses from the drop in Hua Hong's long position.| Dow Jones vs. Xiabuxiabu Catering Management | Dow Jones vs. Neogen | Dow Jones vs. Orion Office Reit | Dow Jones vs. Bassett Furniture Industries |
| Hua Hong vs. Discover Financial Services | Hua Hong vs. COPLAND ROAD CAPITAL | Hua Hong vs. BANK OF CHINA | Hua Hong vs. Chiba Bank |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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