Correlation Between Dow Jones and China Shengmu
Can any of the company-specific risk be diversified away by investing in both Dow Jones and China Shengmu 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 China Shengmu 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 China Shengmu Organic, you can compare the effects of market volatilities on Dow Jones and China Shengmu 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 China Shengmu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and China Shengmu.
Diversification Opportunities for Dow Jones and China Shengmu
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and China is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and China Shengmu Organic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Shengmu Organic 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 China Shengmu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Shengmu Organic has no effect on the direction of Dow Jones i.e., Dow Jones and China Shengmu go up and down completely randomly.
Pair Corralation between Dow Jones and China Shengmu
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.69 times more return on investment than China Shengmu. However, Dow Jones Industrial is 1.46 times less risky than China Shengmu. It trades about 0.27 of its potential returns per unit of risk. China Shengmu Organic is currently generating about 0.08 per unit of risk. If you would invest 4,223,305 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 248,901 from holding Dow Jones Industrial or generate 5.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. China Shengmu Organic
Performance |
| Timeline |
Dow Jones and China Shengmu Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
China Shengmu Organic
Pair trading matchups for China Shengmu
Pair Trading with Dow Jones and China Shengmu
The main advantage of trading using opposite Dow Jones and China Shengmu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, China Shengmu 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 China Shengmu will offset losses from the drop in China Shengmu's long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| China Shengmu vs. Daito Trust Construction | China Shengmu vs. Granite Construction | China Shengmu vs. Penta Ocean Construction Co | China Shengmu vs. Federal Agricultural Mortgage |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |