Correlation Between Dow Jones and EDP Energias
Can any of the company-specific risk be diversified away by investing in both Dow Jones and EDP Energias 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 EDP Energias 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 EDP Energias, you can compare the effects of market volatilities on Dow Jones and EDP Energias 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 EDP Energias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and EDP Energias.
Diversification Opportunities for Dow Jones and EDP Energias
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and EDP is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and EDP Energias in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Energias 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 EDP Energias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Energias has no effect on the direction of Dow Jones i.e., Dow Jones and EDP Energias go up and down completely randomly.
Pair Corralation between Dow Jones and EDP Energias
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.44 times more return on investment than EDP Energias. However, Dow Jones Industrial is 2.27 times less risky than EDP Energias. It trades about 0.26 of its potential returns per unit of risk. EDP Energias is currently generating about -0.12 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 234,900 from holding Dow Jones Industrial or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. EDP Energias
Performance |
| Timeline |
Dow Jones and EDP Energias Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
EDP Energias
Pair trading matchups for EDP Energias
Pair Trading with Dow Jones and EDP Energias
The main advantage of trading using opposite Dow Jones and EDP Energias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, EDP Energias 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 EDP Energias will offset losses from the drop in EDP Energias' long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| EDP Energias vs. Galp Energia SGPS | EDP Energias vs. Sonae SGPS SA | EDP Energias vs. Banco Comercial Portugues | EDP Energias vs. REN Redes |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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