Correlation Between Dow Jones and Lion Biotechnologies
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Lion Biotechnologies 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 Lion Biotechnologies 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 Lion Biotechnologies, you can compare the effects of market volatilities on Dow Jones and Lion Biotechnologies 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 Lion Biotechnologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Lion Biotechnologies.
Diversification Opportunities for Dow Jones and Lion Biotechnologies
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Lion is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Lion Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Biotechnologies 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 Lion Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Biotechnologies has no effect on the direction of Dow Jones i.e., Dow Jones and Lion Biotechnologies go up and down completely randomly.
Pair Corralation between Dow Jones and Lion Biotechnologies
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.19 times more return on investment than Lion Biotechnologies. However, Dow Jones Industrial is 5.39 times less risky than Lion Biotechnologies. It trades about 0.26 of its potential returns per unit of risk. Lion Biotechnologies is currently generating about -0.1 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 234,900 from holding Dow Jones Industrial or generate 5.54% 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. Lion Biotechnologies
Performance |
| Timeline |
Dow Jones and Lion Biotechnologies Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Lion Biotechnologies
Pair trading matchups for Lion Biotechnologies
Pair Trading with Dow Jones and Lion Biotechnologies
The main advantage of trading using opposite Dow Jones and Lion Biotechnologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Lion Biotechnologies 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 Lion Biotechnologies will offset losses from the drop in Lion Biotechnologies' long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| Lion Biotechnologies vs. Nucletron Electronic Aktiengesellschaft | Lion Biotechnologies vs. ELECTRONIC ARTS | Lion Biotechnologies vs. Electronic Arts | Lion Biotechnologies vs. BYD ELECTRONIC |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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