Correlation Between Dow Jones and Amphenol
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Amphenol 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 Amphenol 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 Amphenol, you can compare the effects of market volatilities on Dow Jones and Amphenol 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 Amphenol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Amphenol.
Diversification Opportunities for Dow Jones and Amphenol
Very poor diversification
The 3 months correlation between Dow and Amphenol is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Amphenol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amphenol 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 Amphenol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amphenol has no effect on the direction of Dow Jones i.e., Dow Jones and Amphenol go up and down completely randomly.
Pair Corralation between Dow Jones and Amphenol
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.08 times less return on investment than Amphenol. But when comparing it to its historical volatility, Dow Jones Industrial is 1.72 times less risky than Amphenol. It trades about 0.29 of its potential returns per unit of risk. Amphenol is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 6,836 in Amphenol on August 31, 2024 and sell it today you would earn a total of 438.00 from holding Amphenol or generate 6.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Amphenol
Performance |
| Timeline |
Dow Jones and Amphenol Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Amphenol
Pair trading matchups for Amphenol
Pair Trading with Dow Jones and Amphenol
The main advantage of trading using opposite Dow Jones and Amphenol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Amphenol 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 Amphenol will offset losses from the drop in Amphenol'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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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