Correlation Between Dow Jones and Carmat SA
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Carmat SA 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 Carmat SA 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 Carmat SA, you can compare the effects of market volatilities on Dow Jones and Carmat SA 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 Carmat SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Carmat SA.
Diversification Opportunities for Dow Jones and Carmat SA
Pay attention - limited upside
The 3 months correlation between Dow and Carmat is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Carmat SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carmat SA 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 Carmat SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carmat SA has no effect on the direction of Dow Jones i.e., Dow Jones and Carmat SA go up and down completely randomly.
Pair Corralation between Dow Jones and Carmat SA
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.1 times more return on investment than Carmat SA. However, Dow Jones Industrial is 10.12 times less risky than Carmat SA. It trades about 0.11 of its potential returns per unit of risk. Carmat SA is currently generating about -0.04 per unit of risk. If you would invest 3,356,181 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 1,116,025 from holding Dow Jones Industrial or generate 33.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 97.77% |
| Values | Daily Returns |
Dow Jones Industrial vs. Carmat SA
Performance |
| Timeline |
Dow Jones and Carmat SA Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Carmat SA
Pair trading matchups for Carmat SA
Pair Trading with Dow Jones and Carmat SA
The main advantage of trading using opposite Dow Jones and Carmat SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Carmat SA 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 Carmat SA will offset losses from the drop in Carmat SA's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| Carmat SA vs. China Communications Services | Carmat SA vs. Vulcan Materials | Carmat SA vs. NEWELL RUBBERMAID | Carmat SA vs. Liberty Broadband |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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