Correlation Between Dow Jones and Erbud SA
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Erbud SA 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 Erbud SA 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 Erbud SA, you can compare the effects of market volatilities on Dow Jones and Erbud SA 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 Erbud SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Erbud SA.
Diversification Opportunities for Dow Jones and Erbud SA
Very good diversification
The 3 months correlation between Dow and Erbud is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Erbud SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erbud SA 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 Erbud SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erbud SA has no effect on the direction of Dow Jones i.e., Dow Jones and Erbud SA go up and down completely randomly.
Pair Corralation between Dow Jones and Erbud SA
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.3 times more return on investment than Erbud SA. However, Dow Jones Industrial is 3.3 times less risky than Erbud SA. It trades about 0.13 of its potential returns per unit of risk. Erbud SA is currently generating about 0.01 per unit of risk. If you would invest 3,611,738 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 879,327 from holding Dow Jones Industrial or generate 24.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Dow Jones Industrial vs. Erbud SA
Performance |
| Timeline |
Dow Jones and Erbud SA Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Erbud SA
Pair trading matchups for Erbud SA
Pair Trading with Dow Jones and Erbud SA
The main advantage of trading using opposite Dow Jones and Erbud SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Erbud SA 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 Erbud SA will offset losses from the drop in Erbud SA's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| Erbud SA vs. Banco Santander SA | Erbud SA vs. UniCredit SpA | Erbud SA vs. CEZ as | Erbud SA vs. Polski Koncern Naftowy |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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