Correlation Between Dow Jones and First Graphene
Can any of the company-specific risk be diversified away by investing in both Dow Jones and First Graphene 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 Graphene 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 Graphene, you can compare the effects of market volatilities on Dow Jones and First Graphene 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 Graphene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and First Graphene.
Diversification Opportunities for Dow Jones and First Graphene
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dow and First is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and First Graphene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Graphene 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 Graphene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Graphene has no effect on the direction of Dow Jones i.e., Dow Jones and First Graphene go up and down completely randomly.
Pair Corralation between Dow Jones and First Graphene
Assuming the 90 days trading horizon Dow Jones is expected to generate 7.49 times less return on investment than First Graphene. But when comparing it to its historical volatility, Dow Jones Industrial is 20.02 times less risky than First Graphene. It trades about 0.12 of its potential returns per unit of risk. First Graphene is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6.00 in First Graphene on August 31, 2024 and sell it today you would lose (3.90) from holding First Graphene or give up 65.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Dow Jones Industrial vs. First Graphene
Performance |
| Timeline |
Dow Jones and First Graphene Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
First Graphene
Pair trading matchups for First Graphene
Pair Trading with Dow Jones and First Graphene
The main advantage of trading using opposite Dow Jones and First Graphene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, First Graphene 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 Graphene will offset losses from the drop in First Graphene's 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 |
| First Graphene vs. Haydale Graphene Industries | First Graphene vs. Versarien plc | First Graphene vs. NanoXplore | First Graphene vs. G6 Materials 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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