Correlation Between Dow Jones and Europa Metals
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Europa Metals 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 Europa Metals 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 Europa Metals, you can compare the effects of market volatilities on Dow Jones and Europa Metals 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 Europa Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Europa Metals.
Diversification Opportunities for Dow Jones and Europa Metals
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Europa is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals 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 Europa Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europa Metals has no effect on the direction of Dow Jones i.e., Dow Jones and Europa Metals go up and down completely randomly.
Pair Corralation between Dow Jones and Europa Metals
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.86 times less return on investment than Europa Metals. But when comparing it to its historical volatility, Dow Jones Industrial is 12.51 times less risky than Europa Metals. It trades about 0.16 of its potential returns per unit of risk. Europa Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 7,000 in Europa Metals on August 25, 2024 and sell it today you would lose (700.00) from holding Europa Metals or give up 10.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.89% |
| Values | Daily Returns |
Dow Jones Industrial vs. Europa Metals
Performance |
| Timeline |
Dow Jones and Europa Metals Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Europa Metals
Pair trading matchups for Europa Metals
Pair Trading with Dow Jones and Europa Metals
The main advantage of trading using opposite Dow Jones and Europa Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Europa Metals 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 Europa Metals will offset losses from the drop in Europa Metals' long position.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| Europa Metals vs. Datatec | Europa Metals vs. Trematon Capital Investments | Europa Metals vs. Master Drilling Group | Europa Metals vs. Frontier Transport Holdings |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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