Correlation Between Dow Jones and BBVA Banco
Can any of the company-specific risk be diversified away by investing in both Dow Jones and BBVA Banco 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 BBVA Banco 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 BBVA Banco Frances, you can compare the effects of market volatilities on Dow Jones and BBVA Banco 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 BBVA Banco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BBVA Banco.
Diversification Opportunities for Dow Jones and BBVA Banco
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and BBVA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BBVA Banco Frances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBVA Banco Frances 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 BBVA Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBVA Banco Frances has no effect on the direction of Dow Jones i.e., Dow Jones and BBVA Banco go up and down completely randomly.
Pair Corralation between Dow Jones and BBVA Banco
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.54 times less return on investment than BBVA Banco. But when comparing it to its historical volatility, Dow Jones Industrial is 4.53 times less risky than BBVA Banco. It trades about 0.37 of its potential returns per unit of risk. BBVA Banco Frances is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,190 in BBVA Banco Frances on September 1, 2024 and sell it today you would earn a total of 360.00 from holding BBVA Banco Frances or generate 30.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 91.3% |
| Values | Daily Returns |
Dow Jones Industrial vs. BBVA Banco Frances
Performance |
| Timeline |
Dow Jones and BBVA Banco Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BBVA Banco Frances
Pair trading matchups for BBVA Banco
Pair Trading with Dow Jones and BBVA Banco
The main advantage of trading using opposite Dow Jones and BBVA Banco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, BBVA Banco 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 BBVA Banco will offset losses from the drop in BBVA Banco's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| BBVA Banco vs. National Beverage Corp | BBVA Banco vs. SIDETRADE EO 1 | BBVA Banco vs. National Retail Properties | BBVA Banco vs. SALESFORCE INC CDR |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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