Correlation Between Dow Jones and Space Shuttle
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Space Shuttle 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 Space Shuttle 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 Space Shuttle Hi Tech, you can compare the effects of market volatilities on Dow Jones and Space Shuttle 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 Space Shuttle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Space Shuttle.
Diversification Opportunities for Dow Jones and Space Shuttle
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Space is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Space Shuttle Hi Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Space Shuttle Hi 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 Space Shuttle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Space Shuttle Hi has no effect on the direction of Dow Jones i.e., Dow Jones and Space Shuttle go up and down completely randomly.
Pair Corralation between Dow Jones and Space Shuttle
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.29 times more return on investment than Space Shuttle. However, Dow Jones Industrial is 3.48 times less risky than Space Shuttle. It trades about 0.15 of its potential returns per unit of risk. Space Shuttle Hi Tech is currently generating about -0.06 per unit of risk. If you would invest 3,880,733 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 597,467 from holding Dow Jones Industrial or generate 15.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. Space Shuttle Hi Tech
Performance |
| Timeline |
Dow Jones and Space Shuttle Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Space Shuttle Hi Tech
Pair trading matchups for Space Shuttle
Pair Trading with Dow Jones and Space Shuttle
The main advantage of trading using opposite Dow Jones and Space Shuttle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Space Shuttle 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 Space Shuttle will offset losses from the drop in Space Shuttle's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| Space Shuttle vs. Universal Microelectronics Co | Space Shuttle vs. AVerMedia Technologies | Space Shuttle vs. Symtek Automation Asia | Space Shuttle vs. WiseChip Semiconductor |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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