Correlation Between Dow Jones and Ping An
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Ping An 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 Ping An 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 Ping An Healthcare, you can compare the effects of market volatilities on Dow Jones and Ping An 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 Ping An. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Ping An.
Diversification Opportunities for Dow Jones and Ping An
Poor diversification
The 3 months correlation between Dow and Ping is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Ping An Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ping An Healthcare 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 Ping An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ping An Healthcare has no effect on the direction of Dow Jones i.e., Dow Jones and Ping An go up and down completely randomly.
Pair Corralation between Dow Jones and Ping An
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.47 times less return on investment than Ping An. But when comparing it to its historical volatility, Dow Jones Industrial is 5.23 times less risky than Ping An. It trades about 0.37 of its potential returns per unit of risk. Ping An Healthcare is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 136.00 in Ping An Healthcare on September 1, 2024 and sell it today you would earn a total of 39.00 from holding Ping An Healthcare or generate 28.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Dow Jones Industrial vs. Ping An Healthcare
Performance |
| Timeline |
Dow Jones and Ping An Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Ping An Healthcare
Pair trading matchups for Ping An
Pair Trading with Dow Jones and Ping An
The main advantage of trading using opposite Dow Jones and Ping An positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Ping An 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 Ping An will offset losses from the drop in Ping An's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Ping An vs. Ribbon Communications | Ping An vs. Gamma Communications plc | Ping An vs. Ryanair Holdings plc | Ping An vs. Chunghwa Telecom 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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