Correlation Between Dow Jones and AP Mller
Can any of the company-specific risk be diversified away by investing in both Dow Jones and AP Mller 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 AP Mller 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 AP Mller , you can compare the effects of market volatilities on Dow Jones and AP Mller 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 AP Mller. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and AP Mller.
Diversification Opportunities for Dow Jones and AP Mller
Poor diversification
The 3 months correlation between Dow and DP4A is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Mller 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 AP Mller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Mller has no effect on the direction of Dow Jones i.e., Dow Jones and AP Mller go up and down completely randomly.
Pair Corralation between Dow Jones and AP Mller
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.25 times less return on investment than AP Mller. But when comparing it to its historical volatility, Dow Jones Industrial is 3.09 times less risky than AP Mller. It trades about 0.26 of its potential returns per unit of risk. AP Mller is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 136,200 in AP Mller on August 29, 2024 and sell it today you would earn a total of 17,400 from holding AP Mller or generate 12.78% 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. AP Mller
Performance |
| Timeline |
Dow Jones and AP Mller Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
AP Mller
Pair trading matchups for AP Mller
Pair Trading with Dow Jones and AP Mller
The main advantage of trading using opposite Dow Jones and AP Mller positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, AP Mller 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 AP Mller will offset losses from the drop in AP Mller's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| AP Mller vs. ZIM Integrated Shipping | AP Mller vs. Superior Plus Corp | AP Mller vs. NMI Holdings | AP Mller vs. SIVERS SEMICONDUCTORS AB |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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