Correlation Between Dow Jones and Blue Ridge
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Blue Ridge 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 Blue Ridge 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 Blue Ridge Real, you can compare the effects of market volatilities on Dow Jones and Blue Ridge 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 Blue Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Blue Ridge.
Diversification Opportunities for Dow Jones and Blue Ridge
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Blue is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Blue Ridge Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Ridge Real 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 Blue Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Ridge Real has no effect on the direction of Dow Jones i.e., Dow Jones and Blue Ridge go up and down completely randomly.
Pair Corralation between Dow Jones and Blue Ridge
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.56 times more return on investment than Blue Ridge. However, Dow Jones Industrial is 1.79 times less risky than Blue Ridge. It trades about 0.07 of its potential returns per unit of risk. Blue Ridge Real is currently generating about -0.02 per unit of risk. If you would invest 3,754,533 in Dow Jones Industrial on September 20, 2024 and sell it today you would earn a total of 478,154 from holding Dow Jones Industrial or generate 12.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Blue Ridge Real
Performance |
| Timeline |
Dow Jones and Blue Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Blue Ridge Real
Pair trading matchups for Blue Ridge
Pair Trading with Dow Jones and Blue Ridge
The main advantage of trading using opposite Dow Jones and Blue Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Blue Ridge 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 Blue Ridge will offset losses from the drop in Blue Ridge's long position.| Dow Jones vs. Digi International | Dow Jones vs. Grupo Televisa SAB | Dow Jones vs. United Microelectronics | Dow Jones vs. Weibo Corp |
| Blue Ridge vs. Ashford Hospitality Trust | Blue Ridge vs. Ashford Hospitality Trust | Blue Ridge vs. Braemar Hotels Resorts | Blue Ridge vs. Braemar Hotels Resorts |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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