Correlation Between Dow Jones and St James’s
Can any of the company-specific risk be diversified away by investing in both Dow Jones and St James’s 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 St James’s 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 St Jamess Place, you can compare the effects of market volatilities on Dow Jones and St James’s 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 St James’s. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and St James’s.
Diversification Opportunities for Dow Jones and St James’s
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and 1IV is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and St Jamess Place in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Jamess Place 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 St James’s. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Jamess Place has no effect on the direction of Dow Jones i.e., Dow Jones and St James’s go up and down completely randomly.
Pair Corralation between Dow Jones and St James’s
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the St James’s. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 2.74 times less risky than St James’s. The index trades about -0.01 of its potential returns per unit of risk. The St Jamess Place is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 974.00 in St Jamess Place on September 14, 2024 and sell it today you would earn a total of 99.00 from holding St Jamess Place or generate 10.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. St Jamess Place
Performance |
| Timeline |
Dow Jones and St James’s Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
St Jamess Place
Pair trading matchups for St James’s
Pair Trading with Dow Jones and St James’s
The main advantage of trading using opposite Dow Jones and St James’s positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, St James’s 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 St James’s will offset losses from the drop in St James’s' long position.| Dow Jones vs. Hurco Companies | Dow Jones vs. Tyson Foods | Dow Jones vs. MYR Group | Dow Jones vs. Cannae Holdings |
| St James’s vs. Cogent Communications Holdings | St James’s vs. Mobilezone Holding AG | St James’s vs. Digilife Technologies Limited | St James’s vs. ACCSYS TECHPLC EO |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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