Correlation Between Dow Jones and Air T
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Air T 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 Air T 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 Air T Inc, you can compare the effects of market volatilities on Dow Jones and Air T 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 Air T. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Air T.
Diversification Opportunities for Dow Jones and Air T
Excellent diversification
The 3 months correlation between Dow and Air is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Air T Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air T Inc 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 Air T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air T Inc has no effect on the direction of Dow Jones i.e., Dow Jones and Air T go up and down completely randomly.
Pair Corralation between Dow Jones and Air T
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.67 times less return on investment than Air T. But when comparing it to its historical volatility, Dow Jones Industrial is 6.98 times less risky than Air T. It trades about 0.29 of its potential returns per unit of risk. Air T Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,716 in Air T Inc on August 31, 2024 and sell it today you would earn a total of 212.00 from holding Air T Inc or generate 12.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Air T Inc
Performance |
| Timeline |
Dow Jones and Air T Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Air T Inc
Pair trading matchups for Air T
Pair Trading with Dow Jones and Air T
The main advantage of trading using opposite Dow Jones and Air T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Air T 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 Air T will offset losses from the drop in Air T'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 |
| Air T vs. Addentax Group Corp | Air T vs. Hub Group | Air T vs. Landstar System | Air T vs. JB Hunt Transport |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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