Correlation Between Dow Jones and Adata Technology
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Adata Technology 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 Adata Technology 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 Adata Technology Co, you can compare the effects of market volatilities on Dow Jones and Adata Technology 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 Adata Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Adata Technology.
Diversification Opportunities for Dow Jones and Adata Technology
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Adata is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Adata Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adata Technology 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 Adata Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adata Technology has no effect on the direction of Dow Jones i.e., Dow Jones and Adata Technology go up and down completely randomly.
Pair Corralation between Dow Jones and Adata Technology
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.77 times more return on investment than Adata Technology. However, Dow Jones Industrial is 1.3 times less risky than Adata Technology. It trades about 0.29 of its potential returns per unit of risk. Adata Technology Co is currently generating about 0.08 per unit of risk. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 258,052 from holding Dow Jones Industrial or generate 6.12% 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. Adata Technology Co
Performance |
| Timeline |
Dow Jones and Adata Technology Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Adata Technology Co
Pair trading matchups for Adata Technology
Pair Trading with Dow Jones and Adata Technology
The main advantage of trading using opposite Dow Jones and Adata Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Adata Technology 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 Adata Technology will offset losses from the drop in Adata Technology's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| Adata Technology vs. Taiwan Semiconductor Manufacturing | Adata Technology vs. MediaTek | Adata Technology vs. United Microelectronics | Adata Technology vs. Novatek Microelectronics Corp |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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