Correlation Between Dow Jones and Carnegie Clean
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Carnegie Clean 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 Carnegie Clean 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 Carnegie Clean Energy, you can compare the effects of market volatilities on Dow Jones and Carnegie Clean 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 Carnegie Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Carnegie Clean.
Diversification Opportunities for Dow Jones and Carnegie Clean
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Carnegie is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Carnegie Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnegie Clean Energy 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 Carnegie Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnegie Clean Energy has no effect on the direction of Dow Jones i.e., Dow Jones and Carnegie Clean go up and down completely randomly.
Pair Corralation between Dow Jones and Carnegie Clean
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.15 times more return on investment than Carnegie Clean. However, Dow Jones Industrial is 6.5 times less risky than Carnegie Clean. It trades about 0.09 of its potential returns per unit of risk. Carnegie Clean Energy is currently generating about -0.03 per unit of risk. If you would invest 3,755,792 in Dow Jones Industrial on September 14, 2024 and sell it today you would earn a total of 635,620 from holding Dow Jones Industrial or generate 16.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Dow Jones Industrial vs. Carnegie Clean Energy
Performance |
| Timeline |
Dow Jones and Carnegie Clean Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Carnegie Clean Energy
Pair trading matchups for Carnegie Clean
Pair Trading with Dow Jones and Carnegie Clean
The main advantage of trading using opposite Dow Jones and Carnegie Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Carnegie Clean 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 Carnegie Clean will offset losses from the drop in Carnegie Clean's long position.| Dow Jones vs. Hurco Companies | Dow Jones vs. Tyson Foods | Dow Jones vs. MYR Group | Dow Jones vs. Cannae Holdings |
| Carnegie Clean vs. Superior Plus Corp | Carnegie Clean vs. SIVERS SEMICONDUCTORS AB | Carnegie Clean vs. Norsk Hydro ASA | Carnegie Clean vs. Reliance Steel Aluminum |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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