Correlation Between Dow Jones and Advanced Ceramic
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Advanced Ceramic 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 Advanced Ceramic 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 Advanced Ceramic X, you can compare the effects of market volatilities on Dow Jones and Advanced Ceramic 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 Advanced Ceramic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Advanced Ceramic.
Diversification Opportunities for Dow Jones and Advanced Ceramic
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Advanced is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Advanced Ceramic X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Ceramic X 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 Advanced Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Ceramic X has no effect on the direction of Dow Jones i.e., Dow Jones and Advanced Ceramic go up and down completely randomly.
Pair Corralation between Dow Jones and Advanced Ceramic
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.32 times more return on investment than Advanced Ceramic. However, Dow Jones Industrial is 3.14 times less risky than Advanced Ceramic. It trades about 0.11 of its potential returns per unit of risk. Advanced Ceramic X is currently generating about -0.04 per unit of risk. If you would invest 3,858,519 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 632,546 from holding Dow Jones Industrial or generate 16.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.47% |
| Values | Daily Returns |
Dow Jones Industrial vs. Advanced Ceramic X
Performance |
| Timeline |
Dow Jones and Advanced Ceramic Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Advanced Ceramic X
Pair trading matchups for Advanced Ceramic
Pair Trading with Dow Jones and Advanced Ceramic
The main advantage of trading using opposite Dow Jones and Advanced Ceramic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Advanced Ceramic 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 Advanced Ceramic will offset losses from the drop in Advanced Ceramic's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Advanced Ceramic vs. Central Reinsurance Corp | Advanced Ceramic vs. Grand Plastic Technology | Advanced Ceramic vs. CHINA DEVELOPMENT FINANCIAL | Advanced Ceramic vs. General Plastic Industrial |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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