Correlation Between Dow Jones and Asia Biomass
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Asia Biomass 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 Asia Biomass 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 Asia Biomass Public, you can compare the effects of market volatilities on Dow Jones and Asia Biomass 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 Asia Biomass. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Asia Biomass.
Diversification Opportunities for Dow Jones and Asia Biomass
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Asia is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Asia Biomass Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Biomass Public 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 Asia Biomass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Biomass Public has no effect on the direction of Dow Jones i.e., Dow Jones and Asia Biomass go up and down completely randomly.
Pair Corralation between Dow Jones and Asia Biomass
Assuming the 90 days trading horizon Dow Jones is expected to generate 70.95 times less return on investment than Asia Biomass. But when comparing it to its historical volatility, Dow Jones Industrial is 101.09 times less risky than Asia Biomass. It trades about 0.1 of its potential returns per unit of risk. Asia Biomass Public is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 134.00 in Asia Biomass Public on August 27, 2024 and sell it today you would lose (4.00) from holding Asia Biomass Public or give up 2.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.74% |
| Values | Daily Returns |
Dow Jones Industrial vs. Asia Biomass Public
Performance |
| Timeline |
Dow Jones and Asia Biomass Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Asia Biomass Public
Pair trading matchups for Asia Biomass
Pair Trading with Dow Jones and Asia Biomass
The main advantage of trading using opposite Dow Jones and Asia Biomass positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Asia Biomass 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 Asia Biomass will offset losses from the drop in Asia Biomass' long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| Asia Biomass vs. Akkhie Prakarn Public | Asia Biomass vs. AIRA Factoring Public | Asia Biomass vs. G Capital Public | Asia Biomass vs. Asia Green Energy |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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