Correlation Between Dow Jones and Communication Cable
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Communication Cable 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 Communication Cable 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 Communication Cable Systems, you can compare the effects of market volatilities on Dow Jones and Communication Cable 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 Communication Cable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Communication Cable.
Diversification Opportunities for Dow Jones and Communication Cable
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dow and Communication is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Communication Cable Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Communication Cable 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 Communication Cable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Communication Cable has no effect on the direction of Dow Jones i.e., Dow Jones and Communication Cable go up and down completely randomly.
Pair Corralation between Dow Jones and Communication Cable
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Communication Cable. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 12.2 times less risky than Communication Cable. The index trades about -0.22 of its potential returns per unit of risk. The Communication Cable Systems is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 27,600 in Communication Cable Systems on November 27, 2024 and sell it today you would earn a total of 20,600 from holding Communication Cable Systems or generate 74.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 90.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Communication Cable Systems
Performance |
| Timeline |
Dow Jones and Communication Cable Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Communication Cable Systems
Pair trading matchups for Communication Cable
Pair Trading with Dow Jones and Communication Cable
The main advantage of trading using opposite Dow Jones and Communication Cable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Communication Cable 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 Communication Cable will offset losses from the drop in Communication Cable's long position.The idea behind Dow Jones Industrial and Communication Cable Systems pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Communication Cable vs. Berkah Prima Perkasa | Communication Cable vs. Hartadinata Abadi Tbk | Communication Cable vs. Estika Tata Tiara | Communication Cable vs. Garudafood Putra Putri |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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