Correlation Between Dow Jones and BOX
Can any of the company-specific risk be diversified away by investing in both Dow Jones and BOX 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 BOX 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 BOX, you can compare the effects of market volatilities on Dow Jones and BOX 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 BOX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BOX.
Diversification Opportunities for Dow Jones and BOX
Good diversification
The 3 months correlation between Dow and BOX is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BOX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOX 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 BOX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOX has no effect on the direction of Dow Jones i.e., Dow Jones and BOX go up and down completely randomly.
Pair Corralation between Dow Jones and BOX
Assuming the 90 days trading horizon Dow Jones is expected to generate 23.01 times less return on investment than BOX. But when comparing it to its historical volatility, Dow Jones Industrial is 54.97 times less risky than BOX. It trades about 0.19 of its potential returns per unit of risk. BOX is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.02 in BOX on August 31, 2024 and sell it today you would lose 0.00 from holding BOX or give up 13.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Dow Jones Industrial vs. BOX
Performance |
| Timeline |
Dow Jones and BOX Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BOX
Pair trading matchups for BOX
Pair Trading with Dow Jones and BOX
The main advantage of trading using opposite Dow Jones and BOX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, BOX 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 BOX will offset losses from the drop in BOX'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 |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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