Correlation Between Dow Jones and ABC BANKING
Can any of the company-specific risk be diversified away by investing in both Dow Jones and ABC BANKING 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 ABC BANKING 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 ABC BANKING PORATION, you can compare the effects of market volatilities on Dow Jones and ABC BANKING 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 ABC BANKING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ABC BANKING.
Diversification Opportunities for Dow Jones and ABC BANKING
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and ABC is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ABC BANKING PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC BANKING PORATION 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 ABC BANKING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC BANKING PORATION has no effect on the direction of Dow Jones i.e., Dow Jones and ABC BANKING go up and down completely randomly.
Pair Corralation between Dow Jones and ABC BANKING
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.76 times more return on investment than ABC BANKING. However, Dow Jones is 2.76 times more volatile than ABC BANKING PORATION. It trades about 0.3 of its potential returns per unit of risk. ABC BANKING PORATION is currently generating about -0.22 per unit of risk. If you would invest 4,270,656 in Dow Jones Industrial on November 5, 2024 and sell it today you would earn a total of 183,810 from holding Dow Jones Industrial or generate 4.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. ABC BANKING PORATION
Performance |
| Timeline |
Dow Jones and ABC BANKING Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
ABC BANKING PORATION
Pair trading matchups for ABC BANKING
Pair Trading with Dow Jones and ABC BANKING
The main advantage of trading using opposite Dow Jones and ABC BANKING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, ABC BANKING 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 ABC BANKING will offset losses from the drop in ABC BANKING's long position.The idea behind Dow Jones Industrial and ABC BANKING PORATION pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| ABC BANKING vs. FINCORP INVESTMENT LTD | ABC BANKING vs. MCB GROUP LIMITED | ABC BANKING vs. MCB GROUP LTD | ABC BANKING vs. LOTTOTECH LTD |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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