Correlation Between Dow Jones and Brand
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Brand 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 Brand 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 Brand Group, you can compare the effects of market volatilities on Dow Jones and Brand 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 Brand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Brand.
Diversification Opportunities for Dow Jones and Brand
Very weak diversification
The 3 months correlation between Dow and Brand is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Brand Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brand 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 Brand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brand Group has no effect on the direction of Dow Jones i.e., Dow Jones and Brand go up and down completely randomly.
Pair Corralation between Dow Jones and Brand
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.3 times more return on investment than Brand. However, Dow Jones Industrial is 3.35 times less risky than Brand. It trades about 0.07 of its potential returns per unit of risk. Brand Group is currently generating about 0.01 per unit of risk. If you would invest 3,394,710 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 992,325 from holding Dow Jones Industrial or generate 29.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 78.02% |
| Values | Daily Returns |
Dow Jones Industrial vs. Brand Group
Performance |
| Timeline |
Dow Jones and Brand Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Brand Group
Pair trading matchups for Brand
Pair Trading with Dow Jones and Brand
The main advantage of trading using opposite Dow Jones and Brand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Brand 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 Brand will offset losses from the drop in Brand's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Brand vs. Meitav Dash Investments | Brand vs. One Software Technologies | Brand vs. Electreon Wireless | Brand vs. B Communications |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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