Correlation Between Dow Jones and Dragon Capital
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Dragon Capital 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 Dragon Capital 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 Dragon Capital Grp, you can compare the effects of market volatilities on Dow Jones and Dragon Capital 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 Dragon Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Dragon Capital.
Diversification Opportunities for Dow Jones and Dragon Capital
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dow and Dragon is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Dragon Capital Grp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dragon Capital Grp 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 Dragon Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dragon Capital Grp has no effect on the direction of Dow Jones i.e., Dow Jones and Dragon Capital go up and down completely randomly.
Pair Corralation between Dow Jones and Dragon Capital
Assuming the 90 days trading horizon Dow Jones is expected to generate 57.34 times less return on investment than Dragon Capital. But when comparing it to its historical volatility, Dow Jones Industrial is 58.68 times less risky than Dragon Capital. It trades about 0.17 of its potential returns per unit of risk. Dragon Capital Grp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 0.03 in Dragon Capital Grp on August 29, 2024 and sell it today you would lose (0.01) from holding Dragon Capital Grp or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Dow Jones Industrial vs. Dragon Capital Grp
Performance |
| Timeline |
Dow Jones and Dragon Capital Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Dragon Capital Grp
Pair trading matchups for Dragon Capital
Pair Trading with Dow Jones and Dragon Capital
The main advantage of trading using opposite Dow Jones and Dragon Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Dragon Capital 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 Dragon Capital will offset losses from the drop in Dragon Capital's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Dragon Capital vs. Crypto Co | Dragon Capital vs. Global Develpmts | Dragon Capital vs. Parsons Corp | Dragon Capital vs. GBT Technologies |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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