Correlation Between Dow Jones and Faysal Bank
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Faysal Bank 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 Faysal Bank 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 Faysal Bank, you can compare the effects of market volatilities on Dow Jones and Faysal Bank 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 Faysal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Faysal Bank.
Diversification Opportunities for Dow Jones and Faysal Bank
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dow and Faysal is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Faysal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faysal Bank 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 Faysal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faysal Bank has no effect on the direction of Dow Jones i.e., Dow Jones and Faysal Bank go up and down completely randomly.
Pair Corralation between Dow Jones and Faysal Bank
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.36 times more return on investment than Faysal Bank. However, Dow Jones Industrial is 2.75 times less risky than Faysal Bank. It trades about 0.15 of its potential returns per unit of risk. Faysal Bank is currently generating about 0.05 per unit of risk. If you would invest 3,870,327 in Dow Jones Industrial on November 3, 2024 and sell it today you would earn a total of 584,139 from holding Dow Jones Industrial or generate 15.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. Faysal Bank
Performance |
| Timeline |
Dow Jones and Faysal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Faysal Bank
Pair trading matchups for Faysal Bank
Pair Trading with Dow Jones and Faysal Bank
The main advantage of trading using opposite Dow Jones and Faysal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Faysal Bank 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 Faysal Bank will offset losses from the drop in Faysal Bank's long position.| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
| Faysal Bank vs. Masood Textile Mills | Faysal Bank vs. Fauji Foods | Faysal Bank vs. KSB Pumps | Faysal Bank vs. Mari Petroleum |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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