Correlation Between Dow Jones and Australian Oilseeds
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Australian Oilseeds 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 Australian Oilseeds 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 Australian Oilseeds Holdings, you can compare the effects of market volatilities on Dow Jones and Australian Oilseeds 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 Australian Oilseeds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Australian Oilseeds.
Diversification Opportunities for Dow Jones and Australian Oilseeds
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Australian is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Australian Oilseeds Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Oilseeds 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 Australian Oilseeds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Oilseeds has no effect on the direction of Dow Jones i.e., Dow Jones and Australian Oilseeds go up and down completely randomly.
Pair Corralation between Dow Jones and Australian Oilseeds
Assuming the 90 days trading horizon Dow Jones is expected to generate 63.31 times less return on investment than Australian Oilseeds. But when comparing it to its historical volatility, Dow Jones Industrial is 45.74 times less risky than Australian Oilseeds. It trades about 0.08 of its potential returns per unit of risk. Australian Oilseeds Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5.01 in Australian Oilseeds Holdings on September 3, 2024 and sell it today you would lose (3.51) from holding Australian Oilseeds Holdings or give up 70.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 27.88% |
| Values | Daily Returns |
Dow Jones Industrial vs. Australian Oilseeds Holdings
Performance |
| Timeline |
Dow Jones and Australian Oilseeds Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Australian Oilseeds Holdings
Pair trading matchups for Australian Oilseeds
Pair Trading with Dow Jones and Australian Oilseeds
The main advantage of trading using opposite Dow Jones and Australian Oilseeds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Australian Oilseeds 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 Australian Oilseeds will offset losses from the drop in Australian Oilseeds' long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| Australian Oilseeds vs. CHS Inc CL | Australian Oilseeds vs. CHS Inc Pref | Australian Oilseeds vs. CHS Inc Pref | Australian Oilseeds vs. CHS Inc CM |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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