Correlation Between Dow Jones and One Choice
Can any of the company-specific risk be diversified away by investing in both Dow Jones and One Choice 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 One Choice 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 One Choice 2035, you can compare the effects of market volatilities on Dow Jones and One Choice 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 One Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and One Choice.
Diversification Opportunities for Dow Jones and One Choice
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and One is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and One Choice 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Choice 2035 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 One Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Choice 2035 has no effect on the direction of Dow Jones i.e., Dow Jones and One Choice go up and down completely randomly.
Pair Corralation between Dow Jones and One Choice
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.7 times more return on investment than One Choice. However, Dow Jones is 2.7 times more volatile than One Choice 2035. It trades about 0.37 of its potential returns per unit of risk. One Choice 2035 is currently generating about 0.38 per unit of risk. If you would invest 4,179,460 in Dow Jones Industrial on September 4, 2024 and sell it today you would earn a total of 298,740 from holding Dow Jones Industrial or generate 7.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. One Choice 2035
Performance |
| Timeline |
Dow Jones and One Choice Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
One Choice 2035
Pair trading matchups for One Choice
Pair Trading with Dow Jones and One Choice
The main advantage of trading using opposite Dow Jones and One Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, One Choice 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 One Choice will offset losses from the drop in One Choice's long position.| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
| One Choice vs. Heartland Value Plus | One Choice vs. Pace Smallmedium Value | One Choice vs. Royce Opportunity Fund | One Choice vs. Ab Discovery Value |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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