Correlation Between Dow Jones and Falcon Metals
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Falcon 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 Falcon 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 Falcon Metals, you can compare the effects of market volatilities on Dow Jones and Falcon 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 Falcon Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Falcon Metals.
Diversification Opportunities for Dow Jones and Falcon Metals
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dow and Falcon is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Falcon Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon 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 Falcon Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Metals has no effect on the direction of Dow Jones i.e., Dow Jones and Falcon Metals go up and down completely randomly.
Pair Corralation between Dow Jones and Falcon Metals
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.55 times less return on investment than Falcon Metals. But when comparing it to its historical volatility, Dow Jones Industrial is 10.15 times less risky than Falcon Metals. It trades about 0.08 of its potential returns per unit of risk. Falcon Metals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 23.00 in Falcon Metals on September 3, 2024 and sell it today you would lose (9.00) from holding Falcon Metals or give up 39.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Dow Jones Industrial vs. Falcon Metals
Performance |
| Timeline |
Dow Jones and Falcon Metals Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Falcon Metals
Pair trading matchups for Falcon Metals
Pair Trading with Dow Jones and Falcon Metals
The main advantage of trading using opposite Dow Jones and Falcon Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Falcon 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 Falcon Metals will offset losses from the drop in Falcon Metals' long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| Falcon Metals vs. Northern Star Resources | Falcon Metals vs. Evolution Mining | Falcon Metals vs. Bluescope Steel | Falcon Metals vs. Aneka Tambang Tbk |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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