Correlation Between Dow Jones and SIM Technology
Can any of the company-specific risk be diversified away by investing in both Dow Jones and SIM 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 SIM 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 SIM Technology Group, you can compare the effects of market volatilities on Dow Jones and SIM 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 SIM Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and SIM Technology.
Diversification Opportunities for Dow Jones and SIM Technology
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and SIM is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and SIM Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIM Technology Group 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 SIM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIM Technology Group has no effect on the direction of Dow Jones i.e., Dow Jones and SIM Technology go up and down completely randomly.
Pair Corralation between Dow Jones and SIM Technology
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.78 times less return on investment than SIM Technology. But when comparing it to its historical volatility, Dow Jones Industrial is 4.27 times less risky than SIM Technology. It trades about 0.14 of its potential returns per unit of risk. SIM Technology Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 257.00 in SIM Technology Group on September 3, 2024 and sell it today you would earn a total of 55.00 from holding SIM Technology Group or generate 21.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.65% |
| Values | Daily Returns |
Dow Jones Industrial vs. SIM Technology Group
Performance |
| Timeline |
Dow Jones and SIM Technology Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
SIM Technology Group
Pair trading matchups for SIM Technology
Pair Trading with Dow Jones and SIM Technology
The main advantage of trading using opposite Dow Jones and SIM Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, SIM 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 SIM Technology will offset losses from the drop in SIM Technology's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| SIM Technology vs. Accton Technology Corp | SIM Technology vs. Wistron NeWeb Corp | SIM Technology vs. Alpha Networks | SIM Technology vs. Gemtek Technology 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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