Correlation Between Dow Jones and Ambea AB
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Ambea AB 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 Ambea AB 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 Ambea AB, you can compare the effects of market volatilities on Dow Jones and Ambea AB 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 Ambea AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Ambea AB.
Diversification Opportunities for Dow Jones and Ambea AB
Modest diversification
The 3 months correlation between Dow and Ambea is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Ambea AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambea AB 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 Ambea AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambea AB has no effect on the direction of Dow Jones i.e., Dow Jones and Ambea AB go up and down completely randomly.
Pair Corralation between Dow Jones and Ambea AB
Assuming the 90 days trading horizon Dow Jones is expected to generate 4.28 times less return on investment than Ambea AB. But when comparing it to its historical volatility, Dow Jones Industrial is 2.92 times less risky than Ambea AB. It trades about 0.08 of its potential returns per unit of risk. Ambea AB is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,383 in Ambea AB on November 27, 2024 and sell it today you would earn a total of 7,317 from holding Ambea AB or generate 216.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. Ambea AB
Performance |
| Timeline |
Dow Jones and Ambea AB Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Ambea AB
Pair trading matchups for Ambea AB
Pair Trading with Dow Jones and Ambea AB
The main advantage of trading using opposite Dow Jones and Ambea AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Ambea AB 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 Ambea AB will offset losses from the drop in Ambea AB's long position.The idea behind Dow Jones Industrial and Ambea AB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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