Correlation Between Dow Jones and Hotai
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Hotai 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 Hotai 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 Hotai Motor Co, you can compare the effects of market volatilities on Dow Jones and Hotai 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 Hotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Hotai.
Diversification Opportunities for Dow Jones and Hotai
Good diversification
The 3 months correlation between Dow and Hotai is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Hotai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotai Motor 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 Hotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotai Motor has no effect on the direction of Dow Jones i.e., Dow Jones and Hotai go up and down completely randomly.
Pair Corralation between Dow Jones and Hotai
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.48 times more return on investment than Hotai. However, Dow Jones Industrial is 2.08 times less risky than Hotai. It trades about 0.13 of its potential returns per unit of risk. Hotai Motor Co is currently generating about -0.03 per unit of risk. If you would invest 3,611,738 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 879,327 from holding Dow Jones Industrial or generate 24.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.98% |
| Values | Daily Returns |
Dow Jones Industrial vs. Hotai Motor Co
Performance |
| Timeline |
Dow Jones and Hotai Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Hotai Motor Co
Pair trading matchups for Hotai
Pair Trading with Dow Jones and Hotai
The main advantage of trading using opposite Dow Jones and Hotai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Hotai 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 Hotai will offset losses from the drop in Hotai's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| Hotai vs. President Chain Store | Hotai vs. Formosa Petrochemical Corp | Hotai vs. Cheng Shin Rubber | Hotai vs. Formosa Chemicals Fibre |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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