Correlation Between Dow Jones and Mastrad
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Mastrad 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 Mastrad 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 Mastrad, you can compare the effects of market volatilities on Dow Jones and Mastrad 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 Mastrad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Mastrad.
Diversification Opportunities for Dow Jones and Mastrad
Significant diversification
The 3 months correlation between Dow and Mastrad is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Mastrad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastrad 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 Mastrad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastrad has no effect on the direction of Dow Jones i.e., Dow Jones and Mastrad go up and down completely randomly.
Pair Corralation between Dow Jones and Mastrad
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.1 times more return on investment than Mastrad. However, Dow Jones Industrial is 10.32 times less risky than Mastrad. It trades about 0.08 of its potential returns per unit of risk. Mastrad is currently generating about -0.03 per unit of risk. If you would invest 3,400,504 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 1,071,702 from holding Dow Jones Industrial or generate 31.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. Mastrad
Performance |
| Timeline |
Dow Jones and Mastrad Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Mastrad
Pair trading matchups for Mastrad
Pair Trading with Dow Jones and Mastrad
The main advantage of trading using opposite Dow Jones and Mastrad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Mastrad 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 Mastrad will offset losses from the drop in Mastrad'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 |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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