Correlation Between Dow Jones and ALD SA
Can any of the company-specific risk be diversified away by investing in both Dow Jones and ALD SA 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 ALD SA 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 ALD SA, you can compare the effects of market volatilities on Dow Jones and ALD SA 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 ALD SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ALD SA.
Diversification Opportunities for Dow Jones and ALD SA
Good diversification
The 3 months correlation between Dow and ALD is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ALD SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALD SA 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 ALD SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALD SA has no effect on the direction of Dow Jones i.e., Dow Jones and ALD SA go up and down completely randomly.
Pair Corralation between Dow Jones and ALD SA
Assuming the 90 days trading horizon Dow Jones is expected to generate 4.58 times less return on investment than ALD SA. But when comparing it to its historical volatility, Dow Jones Industrial is 3.37 times less risky than ALD SA. It trades about 0.19 of its potential returns per unit of risk. ALD SA is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 618.00 in ALD SA on October 24, 2024 and sell it today you would earn a total of 84.00 from holding ALD SA or generate 13.59% 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. ALD SA
Performance |
| Timeline |
Dow Jones and ALD SA Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
ALD SA
Pair trading matchups for ALD SA
Pair Trading with Dow Jones and ALD SA
The main advantage of trading using opposite Dow Jones and ALD SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, ALD SA 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 ALD SA will offset losses from the drop in ALD SA's long position.| Dow Jones vs. Xiabuxiabu Catering Management | Dow Jones vs. Neogen | Dow Jones vs. Orion Office Reit | Dow Jones vs. Bassett Furniture Industries |
| ALD SA vs. Gaztransport Technigaz SAS | ALD SA vs. Union Technologies Informatique | ALD SA vs. Affluent Medical SAS | ALD SA vs. Sartorius Stedim Biotech |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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