Correlation Between Dow Jones and Etsy
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Etsy 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 Etsy 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 Etsy Inc, you can compare the effects of market volatilities on Dow Jones and Etsy 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 Etsy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Etsy.
Diversification Opportunities for Dow Jones and Etsy
Weak diversification
The 3 months correlation between Dow and Etsy is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc 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 Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of Dow Jones i.e., Dow Jones and Etsy go up and down completely randomly.
Pair Corralation between Dow Jones and Etsy
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.29 times more return on investment than Etsy. However, Dow Jones Industrial is 3.4 times less risky than Etsy. It trades about 0.16 of its potential returns per unit of risk. Etsy Inc is currently generating about -0.03 per unit of risk. If you would invest 3,880,733 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 610,332 from holding Dow Jones Industrial or generate 15.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.9% |
| Values | Daily Returns |
Dow Jones Industrial vs. Etsy Inc
Performance |
| Timeline |
Dow Jones and Etsy Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Etsy Inc
Pair trading matchups for Etsy
Pair Trading with Dow Jones and Etsy
The main advantage of trading using opposite Dow Jones and Etsy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Etsy 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 Etsy will offset losses from the drop in Etsy's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
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.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |