Correlation Between Dow Jones and Capital Point
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Capital Point 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 Point 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 Point, you can compare the effects of market volatilities on Dow Jones and Capital Point 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 Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Capital Point.
Diversification Opportunities for Dow Jones and Capital Point
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Capital is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Capital Point in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Point 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 Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Point has no effect on the direction of Dow Jones i.e., Dow Jones and Capital Point go up and down completely randomly.
Pair Corralation between Dow Jones and Capital Point
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.71 times more return on investment than Capital Point. However, Dow Jones Industrial is 1.41 times less risky than Capital Point. It trades about 0.25 of its potential returns per unit of risk. Capital Point is currently generating about 0.16 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 233,449 from holding Dow Jones Industrial or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 82.61% |
| Values | Daily Returns |
Dow Jones Industrial vs. Capital Point
Performance |
| Timeline |
Dow Jones and Capital Point Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Capital Point
Pair trading matchups for Capital Point
Pair Trading with Dow Jones and Capital Point
The main advantage of trading using opposite Dow Jones and Capital Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Capital Point 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 Point will offset losses from the drop in Capital Point's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Capital Point vs. IDI Insurance | Capital Point vs. Eldav L | Capital Point vs. Migdal Insurance | Capital Point vs. Mivtach Shamir |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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