Correlation Between Dow Jones and Avient Corp
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Avient Corp 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 Avient Corp 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 Avient Corp, you can compare the effects of market volatilities on Dow Jones and Avient Corp 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 Avient Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Avient Corp.
Diversification Opportunities for Dow Jones and Avient Corp
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Avient is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Avient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avient Corp 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 Avient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avient Corp has no effect on the direction of Dow Jones i.e., Dow Jones and Avient Corp go up and down completely randomly.
Pair Corralation between Dow Jones and Avient Corp
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.06 times less return on investment than Avient Corp. But when comparing it to its historical volatility, Dow Jones Industrial is 2.32 times less risky than Avient Corp. It trades about 0.19 of its potential returns per unit of risk. Avient Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,705 in Avient Corp on August 31, 2024 and sell it today you would earn a total of 423.00 from holding Avient Corp or generate 8.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Avient Corp
Performance |
| Timeline |
Dow Jones and Avient Corp Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Avient Corp
Pair trading matchups for Avient Corp
Pair Trading with Dow Jones and Avient Corp
The main advantage of trading using opposite Dow Jones and Avient Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Avient Corp 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 Avient Corp will offset losses from the drop in Avient Corp'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 |
| Avient Corp vs. Axalta Coating Systems | Avient Corp vs. H B Fuller | Avient Corp vs. Quaker Chemical | Avient Corp vs. Cabot |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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