Correlation Between Dow Jones and Avanos Medical
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Avanos Medical 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 Avanos Medical 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 Avanos Medical, you can compare the effects of market volatilities on Dow Jones and Avanos Medical 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 Avanos Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Avanos Medical.
Diversification Opportunities for Dow Jones and Avanos Medical
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Avanos is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Avanos Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanos Medical 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 Avanos Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanos Medical has no effect on the direction of Dow Jones i.e., Dow Jones and Avanos Medical go up and down completely randomly.
Pair Corralation between Dow Jones and Avanos Medical
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.34 times more return on investment than Avanos Medical. However, Dow Jones Industrial is 2.96 times less risky than Avanos Medical. It trades about 0.37 of its potential returns per unit of risk. Avanos Medical is currently generating about 0.11 per unit of risk. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Avanos Medical
Performance |
| Timeline |
Dow Jones and Avanos Medical Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Avanos Medical
Pair trading matchups for Avanos Medical
Pair Trading with Dow Jones and Avanos Medical
The main advantage of trading using opposite Dow Jones and Avanos Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Avanos Medical 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 Avanos Medical will offset losses from the drop in Avanos Medical's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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