Correlation Between Dow Jones and First Colombia
Can any of the company-specific risk be diversified away by investing in both Dow Jones and First Colombia 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 First Colombia 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 First Colombia Gold, you can compare the effects of market volatilities on Dow Jones and First Colombia 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 First Colombia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and First Colombia.
Diversification Opportunities for Dow Jones and First Colombia
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and First is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and First Colombia Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Colombia Gold 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 First Colombia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Colombia Gold has no effect on the direction of Dow Jones i.e., Dow Jones and First Colombia go up and down completely randomly.
Pair Corralation between Dow Jones and First Colombia
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the First Colombia. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 601.3 times less risky than First Colombia. The index trades about -0.22 of its potential returns per unit of risk. The First Colombia Gold is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 0.01 in First Colombia Gold on November 27, 2024 and sell it today you would earn a total of 0.00 from holding First Colombia Gold or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. First Colombia Gold
Performance |
| Timeline |
Dow Jones and First Colombia Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
First Colombia Gold
Pair trading matchups for First Colombia
Pair Trading with Dow Jones and First Colombia
The main advantage of trading using opposite Dow Jones and First Colombia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, First Colombia 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 First Colombia will offset losses from the drop in First Colombia's long position.The idea behind Dow Jones Industrial and First Colombia Gold pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| First Colombia vs. Icon Media Holdings | First Colombia vs. Mining Global | First Colombia vs. Eline Entertainment Group | First Colombia vs. Intl Star |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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