Correlation Between Dow Jones and BioLife Solutions
Can any of the company-specific risk be diversified away by investing in both Dow Jones and BioLife Solutions 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 BioLife Solutions 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 BioLife Solutions, you can compare the effects of market volatilities on Dow Jones and BioLife Solutions 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 BioLife Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BioLife Solutions.
Diversification Opportunities for Dow Jones and BioLife Solutions
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dow and BioLife is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BioLife Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLife Solutions 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 BioLife Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLife Solutions has no effect on the direction of Dow Jones i.e., Dow Jones and BioLife Solutions go up and down completely randomly.
Pair Corralation between Dow Jones and BioLife Solutions
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.31 times less return on investment than BioLife Solutions. But when comparing it to its historical volatility, Dow Jones Industrial is 4.76 times less risky than BioLife Solutions. It trades about 0.17 of its potential returns per unit of risk. BioLife Solutions is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,434 in BioLife Solutions on August 28, 2024 and sell it today you would earn a total of 272.00 from holding BioLife Solutions or generate 11.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. BioLife Solutions
Performance |
| Timeline |
Dow Jones and BioLife Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BioLife Solutions
Pair trading matchups for BioLife Solutions
Pair Trading with Dow Jones and BioLife Solutions
The main advantage of trading using opposite Dow Jones and BioLife Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, BioLife Solutions 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 BioLife Solutions will offset losses from the drop in BioLife Solutions' long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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