Correlation Between Dow Jones and Coinbase Global
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Coinbase Global 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 Coinbase Global 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 Coinbase Global, you can compare the effects of market volatilities on Dow Jones and Coinbase Global 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 Coinbase Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Coinbase Global.
Diversification Opportunities for Dow Jones and Coinbase Global
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Coinbase is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Coinbase Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coinbase Global 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 Coinbase Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coinbase Global has no effect on the direction of Dow Jones i.e., Dow Jones and Coinbase Global go up and down completely randomly.
Pair Corralation between Dow Jones and Coinbase Global
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.1 times less return on investment than Coinbase Global. But when comparing it to its historical volatility, Dow Jones Industrial is 5.29 times less risky than Coinbase Global. It trades about 0.29 of its potential returns per unit of risk. Coinbase Global is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 27,065 in Coinbase Global on November 4, 2024 and sell it today you would earn a total of 2,068 from holding Coinbase Global or generate 7.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Coinbase Global
Performance |
| Timeline |
Dow Jones and Coinbase Global Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Coinbase Global
Pair trading matchups for Coinbase Global
Pair Trading with Dow Jones and Coinbase Global
The main advantage of trading using opposite Dow Jones and Coinbase Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Coinbase Global 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 Coinbase Global will offset losses from the drop in Coinbase Global's long position.The idea behind Dow Jones Industrial and Coinbase Global 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.| Coinbase Global vs. Moodys | Coinbase Global vs. MSCI Inc | Coinbase Global vs. Intercontinental Exchange | Coinbase Global vs. CME Group |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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