Correlation Between Dow Jones and Chain Bridge
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Chain Bridge 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 Chain Bridge 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 Chain Bridge I, you can compare the effects of market volatilities on Dow Jones and Chain Bridge 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 Chain Bridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Chain Bridge.
Diversification Opportunities for Dow Jones and Chain Bridge
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Chain is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Chain Bridge I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chain Bridge I 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 Chain Bridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chain Bridge I has no effect on the direction of Dow Jones i.e., Dow Jones and Chain Bridge go up and down completely randomly.
Pair Corralation between Dow Jones and Chain Bridge
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.78 times more return on investment than Chain Bridge. However, Dow Jones Industrial is 1.29 times less risky than Chain Bridge. It trades about 0.17 of its potential returns per unit of risk. Chain Bridge I is currently generating about -0.03 per unit of risk. If you would invest 4,233,015 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 253,016 from holding Dow Jones Industrial or generate 5.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Dow Jones Industrial vs. Chain Bridge I
Performance |
| Timeline |
Dow Jones and Chain Bridge Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Chain Bridge I
Pair trading matchups for Chain Bridge
Pair Trading with Dow Jones and Chain Bridge
The main advantage of trading using opposite Dow Jones and Chain Bridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Chain Bridge 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 Chain Bridge will offset losses from the drop in Chain Bridge's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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