Correlation Between Dow Jones and Australian United
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Australian United 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 Australian United 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 Australian United Investment, you can compare the effects of market volatilities on Dow Jones and Australian United 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 Australian United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Australian United.
Diversification Opportunities for Dow Jones and Australian United
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Australian is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Australian United Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian United 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 Australian United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian United has no effect on the direction of Dow Jones i.e., Dow Jones and Australian United go up and down completely randomly.
Pair Corralation between Dow Jones and Australian United
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.9 times more return on investment than Australian United. However, Dow Jones Industrial is 1.11 times less risky than Australian United. It trades about 0.16 of its potential returns per unit of risk. Australian United Investment is currently generating about 0.04 per unit of risk. If you would invest 3,857,103 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 633,962 from holding Dow Jones Industrial or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Australian United Investment
Performance |
| Timeline |
Dow Jones and Australian United Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Australian United Investment
Pair trading matchups for Australian United
Pair Trading with Dow Jones and Australian United
The main advantage of trading using opposite Dow Jones and Australian United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Australian United 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 Australian United will offset losses from the drop in Australian United'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 |
| Australian United vs. M3 Mining | Australian United vs. Talisman Mining | Australian United vs. Regal Funds Management | Australian United vs. Embark Education Group |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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