Correlation Between Dow Jones and Desktop Metal
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Desktop Metal 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 Desktop Metal 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 Desktop Metal, you can compare the effects of market volatilities on Dow Jones and Desktop Metal 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 Desktop Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Desktop Metal.
Diversification Opportunities for Dow Jones and Desktop Metal
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dow and Desktop is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal 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 Desktop Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desktop Metal has no effect on the direction of Dow Jones i.e., Dow Jones and Desktop Metal go up and down completely randomly.
Pair Corralation between Dow Jones and Desktop Metal
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.15 times more return on investment than Desktop Metal. However, Dow Jones Industrial is 6.81 times less risky than Desktop Metal. It trades about 0.16 of its potential returns per unit of risk. Desktop Metal is currently generating about -0.02 per unit of risk. If you would invest 3,844,154 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 629,503 from holding Dow Jones Industrial or generate 16.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Desktop Metal
Performance |
| Timeline |
Dow Jones and Desktop Metal Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Desktop Metal
Pair trading matchups for Desktop Metal
Pair Trading with Dow Jones and Desktop Metal
The main advantage of trading using opposite Dow Jones and Desktop Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Desktop Metal 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 Desktop Metal will offset losses from the drop in Desktop Metal's long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| Desktop Metal vs. Plexus Corp | Desktop Metal vs. Jabil Circuit | Desktop Metal vs. Sanmina | Desktop Metal vs. Methode Electronics |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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