Correlation Between Dow Jones and Arjo AB
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Arjo 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 Arjo 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 Arjo AB, you can compare the effects of market volatilities on Dow Jones and Arjo 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 Arjo AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Arjo AB.
Diversification Opportunities for Dow Jones and Arjo AB
Excellent diversification
The 3 months correlation between Dow and Arjo is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Arjo AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arjo 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 Arjo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arjo AB has no effect on the direction of Dow Jones i.e., Dow Jones and Arjo AB go up and down completely randomly.
Pair Corralation between Dow Jones and Arjo AB
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.34 times more return on investment than Arjo AB. However, Dow Jones Industrial is 2.93 times less risky than Arjo AB. It trades about 0.08 of its potential returns per unit of risk. Arjo AB is currently generating about 0.01 per unit of risk. If you would invest 3,371,709 in Dow Jones Industrial on October 21, 2024 and sell it today you would earn a total of 977,074 from holding Dow Jones Industrial or generate 28.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Dow Jones Industrial vs. Arjo AB
Performance |
| Timeline |
Dow Jones and Arjo AB Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Arjo AB
Pair trading matchups for Arjo AB
Pair Trading with Dow Jones and Arjo AB
The main advantage of trading using opposite Dow Jones and Arjo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Arjo 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 Arjo AB will offset losses from the drop in Arjo AB's long position.| Dow Jones vs. Ainsworth Game Technology | Dow Jones vs. The Coca Cola | Dow Jones vs. Galaxy Gaming | Dow Jones vs. Playtika Holding Corp |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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