Correlation Between Dow Jones and CAPITAL ONE
Can any of the company-specific risk be diversified away by investing in both Dow Jones and CAPITAL ONE 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 CAPITAL ONE 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 CAPITAL ONE FIN, you can compare the effects of market volatilities on Dow Jones and CAPITAL ONE 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 CAPITAL ONE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and CAPITAL ONE.
Diversification Opportunities for Dow Jones and CAPITAL ONE
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and CAPITAL is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and CAPITAL ONE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAPITAL ONE FIN 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 CAPITAL ONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAPITAL ONE FIN has no effect on the direction of Dow Jones i.e., Dow Jones and CAPITAL ONE go up and down completely randomly.
Pair Corralation between Dow Jones and CAPITAL ONE
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.53 times more return on investment than CAPITAL ONE. However, Dow Jones Industrial is 1.87 times less risky than CAPITAL ONE. It trades about 0.08 of its potential returns per unit of risk. CAPITAL ONE FIN is currently generating about 0.04 per unit of risk. If you would invest 3,410,864 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 1,067,336 from holding Dow Jones Industrial or generate 31.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.02% |
| Values | Daily Returns |
Dow Jones Industrial vs. CAPITAL ONE FIN
Performance |
| Timeline |
Dow Jones and CAPITAL ONE Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
CAPITAL ONE FIN
Pair trading matchups for CAPITAL ONE
Pair Trading with Dow Jones and CAPITAL ONE
The main advantage of trading using opposite Dow Jones and CAPITAL ONE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, CAPITAL ONE 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 CAPITAL ONE will offset losses from the drop in CAPITAL ONE's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| CAPITAL ONE vs. Visa Inc | CAPITAL ONE vs. Visa Inc | CAPITAL ONE vs. American Express | CAPITAL ONE vs. ORIX Corporation |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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