Correlation Between Dow Jones and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Meta Platforms 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 Meta Platforms 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 Meta Platforms, you can compare the effects of market volatilities on Dow Jones and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Meta Platforms.
Diversification Opportunities for Dow Jones and Meta Platforms
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Meta is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Dow Jones i.e., Dow Jones and Meta Platforms go up and down completely randomly.
Pair Corralation between Dow Jones and Meta Platforms
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.58 times more return on investment than Meta Platforms. However, Dow Jones Industrial is 1.71 times less risky than Meta Platforms. It trades about 0.37 of its potential returns per unit of risk. Meta Platforms is currently generating about 0.12 per unit of risk. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Meta Platforms
Performance |
| Timeline |
Dow Jones and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Meta Platforms
Pair trading matchups for Meta Platforms
Pair Trading with Dow Jones and Meta Platforms
The main advantage of trading using opposite Dow Jones and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Meta Platforms vs. Amazon Inc | Meta Platforms vs. Apple Inc | Meta Platforms vs. Meta Platforms | Meta Platforms vs. Microsoft |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |