Correlation Between Dow Jones and Associated British
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Associated British 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 Associated British 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 Associated British Foods, you can compare the effects of market volatilities on Dow Jones and Associated British 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 Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Associated British.
Diversification Opportunities for Dow Jones and Associated British
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Associated is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods 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 Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Dow Jones i.e., Dow Jones and Associated British go up and down completely randomly.
Pair Corralation between Dow Jones and Associated British
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.48 times more return on investment than Associated British. However, Dow Jones Industrial is 2.08 times less risky than Associated British. It trades about 0.11 of its potential returns per unit of risk. Associated British Foods is currently generating about 0.04 per unit of risk. If you would invest 3,405,387 in Dow Jones Industrial on September 12, 2024 and sell it today you would earn a total of 1,019,396 from holding Dow Jones Industrial or generate 29.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.9% |
| Values | Daily Returns |
Dow Jones Industrial vs. Associated British Foods
Performance |
| Timeline |
Dow Jones and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Associated British Foods
Pair trading matchups for Associated British
Pair Trading with Dow Jones and Associated British
The main advantage of trading using opposite Dow Jones and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
| Associated British vs. Carsales | Associated British vs. Sunstone Hotel Investors | Associated British vs. Xenia Hotels Resorts | Associated British vs. Salesforce |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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