Correlation Between Dow Jones and CAR GROUP
Can any of the company-specific risk be diversified away by investing in both Dow Jones and CAR GROUP 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 CAR GROUP 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 CAR GROUP LIMITED, you can compare the effects of market volatilities on Dow Jones and CAR GROUP 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 CAR GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and CAR GROUP.
Diversification Opportunities for Dow Jones and CAR GROUP
Very poor diversification
The 3 months correlation between Dow and CAR is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and CAR GROUP LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAR GROUP LIMITED 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 CAR GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAR GROUP LIMITED has no effect on the direction of Dow Jones i.e., Dow Jones and CAR GROUP go up and down completely randomly.
Pair Corralation between Dow Jones and CAR GROUP
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.58 times less return on investment than CAR GROUP. But when comparing it to its historical volatility, Dow Jones Industrial is 1.88 times less risky than CAR GROUP. It trades about 0.08 of its potential returns per unit of risk. CAR GROUP LIMITED is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,052 in CAR GROUP LIMITED on September 3, 2024 and sell it today you would earn a total of 2,098 from holding CAR GROUP LIMITED or generate 102.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.2% |
| Values | Daily Returns |
Dow Jones Industrial vs. CAR GROUP LIMITED
Performance |
| Timeline |
Dow Jones and CAR GROUP Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
CAR GROUP LIMITED
Pair trading matchups for CAR GROUP
Pair Trading with Dow Jones and CAR GROUP
The main advantage of trading using opposite Dow Jones and CAR GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, CAR GROUP 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 CAR GROUP will offset losses from the drop in CAR GROUP's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| CAR GROUP vs. The Environmental Group | CAR GROUP vs. Macquarie Technology Group | CAR GROUP vs. TTG Fintech | CAR GROUP vs. Spirit Telecom |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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