Correlation Between Dow Jones and Desjardins
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Desjardins 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 Desjardins 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 Desjardins RI Developed, you can compare the effects of market volatilities on Dow Jones and Desjardins 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 Desjardins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Desjardins.
Diversification Opportunities for Dow Jones and Desjardins
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Desjardins is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Desjardins RI Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI Developed 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 Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI Developed has no effect on the direction of Dow Jones i.e., Dow Jones and Desjardins go up and down completely randomly.
Pair Corralation between Dow Jones and Desjardins
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Desjardins. In addition to that, Dow Jones is 1.73 times more volatile than Desjardins RI Developed. It trades about -0.19 of its total potential returns per unit of risk. Desjardins RI Developed is currently generating about 0.34 per unit of volatility. If you would invest 2,474 in Desjardins RI Developed on November 28, 2024 and sell it today you would earn a total of 63.00 from holding Desjardins RI Developed or generate 2.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Desjardins RI Developed
Performance |
| Timeline |
Dow Jones and Desjardins Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Desjardins RI Developed
Pair trading matchups for Desjardins
Pair Trading with Dow Jones and Desjardins
The main advantage of trading using opposite Dow Jones and Desjardins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Desjardins 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 Desjardins will offset losses from the drop in Desjardins' long position.| Dow Jones vs. Gladstone Investment | Dow Jones vs. BW Offshore Limited | Dow Jones vs. Fidus Investment Corp | Dow Jones vs. Aperture Health |
| Desjardins vs. Desjardins American Equity | Desjardins vs. Desjardins RI Canada | Desjardins vs. Desjardins RI Canada | Desjardins vs. Desjardins Canadian Corporate |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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