Correlation Between Dow Jones and Alstom SA
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Alstom SA 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 Alstom SA 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 Alstom SA, you can compare the effects of market volatilities on Dow Jones and Alstom SA 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 Alstom SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Alstom SA.
Diversification Opportunities for Dow Jones and Alstom SA
Poor diversification
The 3 months correlation between Dow and Alstom is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Alstom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alstom SA 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 Alstom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alstom SA has no effect on the direction of Dow Jones i.e., Dow Jones and Alstom SA go up and down completely randomly.
Pair Corralation between Dow Jones and Alstom SA
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.15 times less return on investment than Alstom SA. But when comparing it to its historical volatility, Dow Jones Industrial is 3.66 times less risky than Alstom SA. It trades about 0.13 of its potential returns per unit of risk. Alstom SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,124 in Alstom SA on August 24, 2024 and sell it today you would earn a total of 965.00 from holding Alstom SA or generate 85.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.81% |
| Values | Daily Returns |
Dow Jones Industrial vs. Alstom SA
Performance |
| Timeline |
Dow Jones and Alstom SA Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Alstom SA
Pair trading matchups for Alstom SA
Pair Trading with Dow Jones and Alstom SA
The main advantage of trading using opposite Dow Jones and Alstom SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Alstom SA 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 Alstom SA will offset losses from the drop in Alstom SA's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Alstom SA vs. Bouygues SA | Alstom SA vs. Compagnie de Saint Gobain | Alstom SA vs. Veolia Environnement VE | Alstom SA vs. Vinci SA |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals |