Correlation Between Dow Jones and Asia Pacific
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Asia Pacific 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 Asia Pacific 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 Asia Pacific Investment, you can compare the effects of market volatilities on Dow Jones and Asia Pacific 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 Asia Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Asia Pacific.
Diversification Opportunities for Dow Jones and Asia Pacific
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Asia is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Asia Pacific Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pacific Investment 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 Asia Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pacific Investment has no effect on the direction of Dow Jones i.e., Dow Jones and Asia Pacific go up and down completely randomly.
Pair Corralation between Dow Jones and Asia Pacific
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.18 times more return on investment than Asia Pacific. However, Dow Jones Industrial is 5.59 times less risky than Asia Pacific. It trades about 0.08 of its potential returns per unit of risk. Asia Pacific Investment is currently generating about -0.01 per unit of risk. If you would invest 3,378,148 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 1,094,058 from holding Dow Jones Industrial or generate 32.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
Dow Jones Industrial vs. Asia Pacific Investment
Performance |
| Timeline |
Dow Jones and Asia Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Asia Pacific Investment
Pair trading matchups for Asia Pacific
Pair Trading with Dow Jones and Asia Pacific
The main advantage of trading using opposite Dow Jones and Asia Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Asia Pacific 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 Asia Pacific will offset losses from the drop in Asia Pacific's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Asia Pacific vs. FIT INVEST JSC | Asia Pacific vs. Damsan JSC | Asia Pacific vs. An Phat Plastic | Asia Pacific vs. Alphanam ME |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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