Correlation Between Dow Jones and BRNPB
Can any of the company-specific risk be diversified away by investing in both Dow Jones and BRNPB 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 BRNPB 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 BRNPB, you can compare the effects of market volatilities on Dow Jones and BRNPB 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 BRNPB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BRNPB.
Diversification Opportunities for Dow Jones and BRNPB
Significant diversification
The 3 months correlation between Dow and BRNPB is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BRNPB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRNPB 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 BRNPB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRNPB has no effect on the direction of Dow Jones i.e., Dow Jones and BRNPB go up and down completely randomly.
Pair Corralation between Dow Jones and BRNPB
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.06 times more return on investment than BRNPB. However, Dow Jones Industrial is 17.62 times less risky than BRNPB. It trades about -0.19 of its potential returns per unit of risk. BRNPB is currently generating about -0.06 per unit of risk. If you would invest 4,471,358 in Dow Jones Industrial on November 28, 2024 and sell it today you would lose (109,242) from holding Dow Jones Industrial or give up 2.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 23.81% |
| Values | Daily Returns |
Dow Jones Industrial vs. BRNPB
Performance |
| Timeline |
Dow Jones and BRNPB Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BRNPB
Pair trading matchups for BRNPB
Pair Trading with Dow Jones and BRNPB
The main advantage of trading using opposite Dow Jones and BRNPB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, BRNPB 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 BRNPB will offset losses from the drop in BRNPB's long position.| Dow Jones vs. Gladstone Investment | Dow Jones vs. BW Offshore Limited | Dow Jones vs. Fidus Investment Corp | Dow Jones vs. Aperture Health |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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