Correlation Between Dow Jones and Airports
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Airports 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 Airports 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 Airports of Thailand, you can compare the effects of market volatilities on Dow Jones and Airports 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 Airports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Airports.
Diversification Opportunities for Dow Jones and Airports
Very poor diversification
The 3 months correlation between Dow and Airports is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Airports of Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airports of Thailand 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 Airports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airports of Thailand has no effect on the direction of Dow Jones i.e., Dow Jones and Airports go up and down completely randomly.
Pair Corralation between Dow Jones and Airports
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.36 times less return on investment than Airports. But when comparing it to its historical volatility, Dow Jones Industrial is 2.69 times less risky than Airports. It trades about 0.18 of its potential returns per unit of risk. Airports of Thailand is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 164.00 in Airports of Thailand on August 28, 2024 and sell it today you would earn a total of 36.00 from holding Airports of Thailand or generate 21.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Airports of Thailand
Performance |
| Timeline |
Dow Jones and Airports Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Airports of Thailand
Pair trading matchups for Airports
Pair Trading with Dow Jones and Airports
The main advantage of trading using opposite Dow Jones and Airports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Airports 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 Airports will offset losses from the drop in Airports' long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| Airports vs. Aerofoam Metals | Airports vs. Porvair plc | Airports vs. Tyson Foods | Airports vs. Lion One Metals |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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