Correlation Between Dow Jones and Afrimat
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Afrimat 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 Afrimat 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 Afrimat, you can compare the effects of market volatilities on Dow Jones and Afrimat 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 Afrimat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Afrimat.
Diversification Opportunities for Dow Jones and Afrimat
Good diversification
The 3 months correlation between Dow and Afrimat is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Afrimat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afrimat 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 Afrimat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afrimat has no effect on the direction of Dow Jones i.e., Dow Jones and Afrimat go up and down completely randomly.
Pair Corralation between Dow Jones and Afrimat
Assuming the 90 days trading horizon Dow Jones is expected to generate 7.17 times less return on investment than Afrimat. But when comparing it to its historical volatility, Dow Jones Industrial is 16.12 times less risky than Afrimat. It trades about 0.08 of its potential returns per unit of risk. Afrimat is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 509,208 in Afrimat on September 3, 2024 and sell it today you would earn a total of 142,092 from holding Afrimat or generate 27.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Dow Jones Industrial vs. Afrimat
Performance |
| Timeline |
Dow Jones and Afrimat Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Afrimat
Pair trading matchups for Afrimat
Pair Trading with Dow Jones and Afrimat
The main advantage of trading using opposite Dow Jones and Afrimat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Afrimat 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 Afrimat will offset losses from the drop in Afrimat's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| Afrimat vs. Deneb Investments | Afrimat vs. Frontier Transport Holdings | Afrimat vs. RCL Foods | Afrimat vs. Astral Foods |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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