Correlation Between Dow Jones and City Developments
Can any of the company-specific risk be diversified away by investing in both Dow Jones and City Developments 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 City Developments 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 City Developments, you can compare the effects of market volatilities on Dow Jones and City Developments 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 City Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and City Developments.
Diversification Opportunities for Dow Jones and City Developments
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and City is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and City Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Developments 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 City Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Developments has no effect on the direction of Dow Jones i.e., Dow Jones and City Developments go up and down completely randomly.
Pair Corralation between Dow Jones and City Developments
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.31 times more return on investment than City Developments. However, Dow Jones Industrial is 3.25 times less risky than City Developments. It trades about 0.12 of its potential returns per unit of risk. City Developments is currently generating about -0.02 per unit of risk. If you would invest 3,383,361 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 1,107,704 from holding Dow Jones Industrial or generate 32.74% 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. City Developments
Performance |
| Timeline |
Dow Jones and City Developments Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
City Developments
Pair trading matchups for City Developments
Pair Trading with Dow Jones and City Developments
The main advantage of trading using opposite Dow Jones and City Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, City Developments 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 City Developments will offset losses from the drop in City Developments' long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| City Developments vs. HUMANA INC | City Developments vs. SCOR PK | City Developments vs. Aquagold International | City Developments vs. Thrivent High Yield |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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