Correlation Between Dow Jones and Carbios
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Carbios 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 Carbios 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 Carbios, you can compare the effects of market volatilities on Dow Jones and Carbios 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 Carbios. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Carbios.
Diversification Opportunities for Dow Jones and Carbios
Pay attention - limited upside
The 3 months correlation between Dow and Carbios is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Carbios in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carbios 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 Carbios. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carbios has no effect on the direction of Dow Jones i.e., Dow Jones and Carbios go up and down completely randomly.
Pair Corralation between Dow Jones and Carbios
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.2 times more return on investment than Carbios. However, Dow Jones Industrial is 4.94 times less risky than Carbios. It trades about 0.09 of its potential returns per unit of risk. Carbios is currently generating about -0.09 per unit of risk. If you would invest 3,320,222 in Dow Jones Industrial on September 5, 2024 and sell it today you would earn a total of 1,150,331 from holding Dow Jones Industrial or generate 34.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 98.02% |
| Values | Daily Returns |
Dow Jones Industrial vs. Carbios
Performance |
| Timeline |
Dow Jones and Carbios Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Carbios
Pair trading matchups for Carbios
Pair Trading with Dow Jones and Carbios
The main advantage of trading using opposite Dow Jones and Carbios positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Carbios 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 Carbios will offset losses from the drop in Carbios' long position.| Dow Jones vs. Shake Shack | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. Dave Busters Entertainment | Dow Jones vs. Meli Hotels International |
| Carbios vs. Spirent Communications plc | Carbios vs. INTERSHOP Communications Aktiengesellschaft | Carbios vs. Chunghwa Telecom Co | Carbios vs. Harmony Gold Mining |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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