Correlation Between Dow Jones and BB Liquidating
Can any of the company-specific risk be diversified away by investing in both Dow Jones and BB Liquidating 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 BB Liquidating 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 BB Liquidating B, you can compare the effects of market volatilities on Dow Jones and BB Liquidating 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 BB Liquidating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BB Liquidating.
Diversification Opportunities for Dow Jones and BB Liquidating
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and BLIBQ is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BB Liquidating B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Liquidating B 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 BB Liquidating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Liquidating B has no effect on the direction of Dow Jones i.e., Dow Jones and BB Liquidating go up and down completely randomly.
Pair Corralation between Dow Jones and BB Liquidating
Assuming the 90 days trading horizon Dow Jones is expected to generate 116.29 times less return on investment than BB Liquidating. But when comparing it to its historical volatility, Dow Jones Industrial is 121.79 times less risky than BB Liquidating. It trades about 0.09 of its potential returns per unit of risk. BB Liquidating B is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 0.01 in BB Liquidating B on August 31, 2024 and sell it today you would earn a total of 0.24 from holding BB Liquidating B or generate 2400.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 28.24% |
| Values | Daily Returns |
Dow Jones Industrial vs. BB Liquidating B
Performance |
| Timeline |
Dow Jones and BB Liquidating Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BB Liquidating B
Pair trading matchups for BB Liquidating
Pair Trading with Dow Jones and BB Liquidating
The main advantage of trading using opposite Dow Jones and BB Liquidating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, BB Liquidating 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 BB Liquidating will offset losses from the drop in BB Liquidating'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 |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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