Correlation Between Dow Jones and DUSK
Can any of the company-specific risk be diversified away by investing in both Dow Jones and DUSK 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 DUSK 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 DUSK, you can compare the effects of market volatilities on Dow Jones and DUSK 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 DUSK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and DUSK.
Diversification Opportunities for Dow Jones and DUSK
Very good diversification
The 3 months correlation between Dow and DUSK is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and DUSK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DUSK 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 DUSK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DUSK has no effect on the direction of Dow Jones i.e., Dow Jones and DUSK go up and down completely randomly.
Pair Corralation between Dow Jones and DUSK
Assuming the 90 days trading horizon Dow Jones is expected to generate 5.84 times less return on investment than DUSK. But when comparing it to its historical volatility, Dow Jones Industrial is 5.31 times less risky than DUSK. It trades about 0.24 of its potential returns per unit of risk. DUSK is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 16.00 in DUSK on August 26, 2024 and sell it today you would earn a total of 5.00 from holding DUSK or generate 31.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. DUSK
Performance |
| Timeline |
Dow Jones and DUSK Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
DUSK
Pair trading matchups for DUSK
Pair Trading with Dow Jones and DUSK
The main advantage of trading using opposite Dow Jones and DUSK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, DUSK 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 DUSK will offset losses from the drop in DUSK's long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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