Correlation Between Dow Jones and Fair Oaks
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Fair Oaks 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 Fair Oaks 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 Fair Oaks Income, you can compare the effects of market volatilities on Dow Jones and Fair Oaks 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 Fair Oaks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Fair Oaks.
Diversification Opportunities for Dow Jones and Fair Oaks
Very weak diversification
The 3 months correlation between Dow and Fair is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Fair Oaks Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Oaks Income 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 Fair Oaks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Oaks Income has no effect on the direction of Dow Jones i.e., Dow Jones and Fair Oaks go up and down completely randomly.
Pair Corralation between Dow Jones and Fair Oaks
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.18 times less return on investment than Fair Oaks. But when comparing it to its historical volatility, Dow Jones Industrial is 1.65 times less risky than Fair Oaks. It trades about 0.12 of its potential returns per unit of risk. Fair Oaks Income is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 39.00 in Fair Oaks Income on August 31, 2024 and sell it today you would earn a total of 15.00 from holding Fair Oaks Income or generate 38.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.94% |
| Values | Daily Returns |
Dow Jones Industrial vs. Fair Oaks Income
Performance |
| Timeline |
Dow Jones and Fair Oaks Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Fair Oaks Income
Pair trading matchups for Fair Oaks
Pair Trading with Dow Jones and Fair Oaks
The main advantage of trading using opposite Dow Jones and Fair Oaks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Fair Oaks 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 Fair Oaks will offset losses from the drop in Fair Oaks' long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| Fair Oaks vs. Samsung Electronics Co | Fair Oaks vs. Samsung Electronics Co | Fair Oaks vs. Hyundai Motor | Fair Oaks vs. Toyota Motor Corp |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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