Correlation Between Dow Jones and Allegheny Technologies
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Allegheny Technologies 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 Allegheny Technologies 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 Allegheny Technologies Incorporated, you can compare the effects of market volatilities on Dow Jones and Allegheny Technologies 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 Allegheny Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Allegheny Technologies.
Diversification Opportunities for Dow Jones and Allegheny Technologies
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Allegheny is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Allegheny Technologies Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegheny Technologies 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 Allegheny Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegheny Technologies has no effect on the direction of Dow Jones i.e., Dow Jones and Allegheny Technologies go up and down completely randomly.
Pair Corralation between Dow Jones and Allegheny Technologies
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.83 times less return on investment than Allegheny Technologies. But when comparing it to its historical volatility, Dow Jones Industrial is 3.28 times less risky than Allegheny Technologies. It trades about 0.1 of its potential returns per unit of risk. Allegheny Technologies Incorporated is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,918 in Allegheny Technologies Incorporated on August 27, 2024 and sell it today you would earn a total of 1,012 from holding Allegheny Technologies Incorporated or generate 20.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Allegheny Technologies Incorpo
Performance |
| Timeline |
Dow Jones and Allegheny Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Allegheny Technologies Incorporated
Pair trading matchups for Allegheny Technologies
Pair Trading with Dow Jones and Allegheny Technologies
The main advantage of trading using opposite Dow Jones and Allegheny Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Allegheny Technologies 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 Allegheny Technologies will offset losses from the drop in Allegheny Technologies' long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| Allegheny Technologies vs. Worthington Industries | Allegheny Technologies vs. Haynes International | Allegheny Technologies vs. ESAB Corp | Allegheny Technologies vs. Insteel Industries |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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