Correlation Between Dow Jones and Aeris Environmental
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Aeris Environmental 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 Aeris Environmental 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 Aeris Environmental, you can compare the effects of market volatilities on Dow Jones and Aeris Environmental 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 Aeris Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Aeris Environmental.
Diversification Opportunities for Dow Jones and Aeris Environmental
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Aeris is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Aeris Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeris Environmental 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 Aeris Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeris Environmental has no effect on the direction of Dow Jones i.e., Dow Jones and Aeris Environmental go up and down completely randomly.
Pair Corralation between Dow Jones and Aeris Environmental
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.51 times less return on investment than Aeris Environmental. But when comparing it to its historical volatility, Dow Jones Industrial is 3.59 times less risky than Aeris Environmental. It trades about 0.3 of its potential returns per unit of risk. Aeris Environmental is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 8.30 in Aeris Environmental on August 31, 2024 and sell it today you would earn a total of 0.70 from holding Aeris Environmental or generate 8.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Dow Jones Industrial vs. Aeris Environmental
Performance |
| Timeline |
Dow Jones and Aeris Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Aeris Environmental
Pair trading matchups for Aeris Environmental
Pair Trading with Dow Jones and Aeris Environmental
The main advantage of trading using opposite Dow Jones and Aeris Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Aeris Environmental 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 Aeris Environmental will offset losses from the drop in Aeris Environmental's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| Aeris Environmental vs. Champion Iron | Aeris Environmental vs. Tombador Iron | Aeris Environmental vs. The Environmental Group | Aeris Environmental vs. Hawsons Iron |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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