Correlation Between Dow Jones and Eclectic Bar
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Eclectic Bar 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 Eclectic Bar 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 Eclectic Bar Group, you can compare the effects of market volatilities on Dow Jones and Eclectic Bar 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 Eclectic Bar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Eclectic Bar.
Diversification Opportunities for Dow Jones and Eclectic Bar
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Eclectic is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Eclectic Bar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eclectic Bar Group 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 Eclectic Bar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eclectic Bar Group has no effect on the direction of Dow Jones i.e., Dow Jones and Eclectic Bar go up and down completely randomly.
Pair Corralation between Dow Jones and Eclectic Bar
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.96 times less return on investment than Eclectic Bar. But when comparing it to its historical volatility, Dow Jones Industrial is 7.15 times less risky than Eclectic Bar. It trades about 0.08 of its potential returns per unit of risk. Eclectic Bar Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,600 in Eclectic Bar Group on September 24, 2024 and sell it today you would earn a total of 2,100 from holding Eclectic Bar Group or generate 80.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Dow Jones Industrial vs. Eclectic Bar Group
Performance |
| Timeline |
Dow Jones and Eclectic Bar Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Eclectic Bar Group
Pair trading matchups for Eclectic Bar
Pair Trading with Dow Jones and Eclectic Bar
The main advantage of trading using opposite Dow Jones and Eclectic Bar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Eclectic Bar 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 Eclectic Bar will offset losses from the drop in Eclectic Bar's long position.| Dow Jones vs. Teleflex Incorporated | Dow Jones vs. Sonida Senior Living | Dow Jones vs. Avadel Pharmaceuticals PLC | Dow Jones vs. Cardinal Health |
| Eclectic Bar vs. Toyota Motor Corp | Eclectic Bar vs. SoftBank Group Corp | Eclectic Bar vs. OTP Bank Nyrt | Eclectic Bar vs. Newmont Corp |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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