Correlation Between Dow Jones and BBC
Can any of the company-specific risk be diversified away by investing in both Dow Jones and BBC 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 BBC 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 BBC Co, you can compare the effects of market volatilities on Dow Jones and BBC 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 BBC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BBC.
Diversification Opportunities for Dow Jones and BBC
Good diversification
The 3 months correlation between Dow and BBC is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BBC Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBC Co 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 BBC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBC Co has no effect on the direction of Dow Jones i.e., Dow Jones and BBC go up and down completely randomly.
Pair Corralation between Dow Jones and BBC
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.78 times less return on investment than BBC. In addition to that, Dow Jones is 1.09 times more volatile than BBC Co. It trades about 0.33 of its total potential returns per unit of risk. BBC Co is currently generating about 0.64 per unit of volatility. If you would invest 775,000 in BBC Co on November 9, 2024 and sell it today you would earn a total of 17,000 from holding BBC Co or generate 2.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 25.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. BBC Co
Performance |
| Timeline |
Dow Jones and BBC Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BBC Co
Pair trading matchups for BBC
Pair Trading with Dow Jones and BBC
The main advantage of trading using opposite Dow Jones and BBC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, BBC 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 BBC will offset losses from the drop in BBC's long position.| Dow Jones vs. Douglas Emmett | Dow Jones vs. Todos Medical | Dow Jones vs. Eastern Co | Dow Jones vs. Merit Medical Systems |
| BBC vs. Kukil Metal Co | BBC vs. Hwangkum Steel Technology | BBC vs. Woori Technology | BBC vs. Neungyule Education |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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