Correlation Between Dow Jones and CEA Industries
Can any of the company-specific risk be diversified away by investing in both Dow Jones and CEA Industries 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 CEA Industries 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 CEA Industries Warrant, you can compare the effects of market volatilities on Dow Jones and CEA Industries 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 CEA Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and CEA Industries.
Diversification Opportunities for Dow Jones and CEA Industries
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and CEA is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and CEA Industries Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEA Industries Warrant 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 CEA Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEA Industries Warrant has no effect on the direction of Dow Jones i.e., Dow Jones and CEA Industries go up and down completely randomly.
Pair Corralation between Dow Jones and CEA Industries
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.96 times less return on investment than CEA Industries. But when comparing it to its historical volatility, Dow Jones Industrial is 31.08 times less risky than CEA Industries. It trades about 0.34 of its potential returns per unit of risk. CEA Industries Warrant is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 0.87 in CEA Industries Warrant on September 2, 2024 and sell it today you would lose (0.08) from holding CEA Industries Warrant or give up 9.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 19.05% |
| Values | Daily Returns |
Dow Jones Industrial vs. CEA Industries Warrant
Performance |
| Timeline |
Dow Jones and CEA Industries Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
CEA Industries Warrant
Pair trading matchups for CEA Industries
Pair Trading with Dow Jones and CEA Industries
The main advantage of trading using opposite Dow Jones and CEA Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, CEA Industries 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 CEA Industries will offset losses from the drop in CEA Industries' long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| CEA Industries vs. Nikola Corp | CEA Industries vs. Wabash National | CEA Industries vs. Titan International | CEA Industries vs. Deere Company |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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