Correlation Between Dow Jones and AllDay Marts
Can any of the company-specific risk be diversified away by investing in both Dow Jones and AllDay Marts 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 AllDay Marts 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 AllDay Marts, you can compare the effects of market volatilities on Dow Jones and AllDay Marts 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 AllDay Marts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and AllDay Marts.
Diversification Opportunities for Dow Jones and AllDay Marts
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and AllDay is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and AllDay Marts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AllDay Marts 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 AllDay Marts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AllDay Marts has no effect on the direction of Dow Jones i.e., Dow Jones and AllDay Marts go up and down completely randomly.
Pair Corralation between Dow Jones and AllDay Marts
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.4 times more return on investment than AllDay Marts. However, Dow Jones Industrial is 2.48 times less risky than AllDay Marts. It trades about 0.34 of its potential returns per unit of risk. AllDay Marts is currently generating about 0.01 per unit of risk. If you would invest 4,205,219 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 285,846 from holding Dow Jones Industrial or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. AllDay Marts
Performance |
| Timeline |
Dow Jones and AllDay Marts Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
AllDay Marts
Pair trading matchups for AllDay Marts
Pair Trading with Dow Jones and AllDay Marts
The main advantage of trading using opposite Dow Jones and AllDay Marts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, AllDay Marts 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 AllDay Marts will offset losses from the drop in AllDay Marts' long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| AllDay Marts vs. Cosco Capital | AllDay Marts vs. Keepers Holdings | AllDay Marts vs. GT Capital Holdings | AllDay Marts vs. Allhome Corp |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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