Correlation Between Dow Jones and First IC
Can any of the company-specific risk be diversified away by investing in both Dow Jones and First IC 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 IC 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 IC, you can compare the effects of market volatilities on Dow Jones and First IC 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 IC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and First IC.
Diversification Opportunities for Dow Jones and First IC
Significant diversification
The 3 months correlation between Dow and First is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and First IC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First IC 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 IC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First IC has no effect on the direction of Dow Jones i.e., Dow Jones and First IC go up and down completely randomly.
Pair Corralation between Dow Jones and First IC
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the First IC. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 2.06 times less risky than First IC. The index trades about -0.01 of its potential returns per unit of risk. The First IC is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 890.00 in First IC on October 26, 2024 and sell it today you would earn a total of 140.00 from holding First IC or generate 15.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Dow Jones Industrial vs. First IC
Performance |
| Timeline |
Dow Jones and First IC Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
First IC
Pair trading matchups for First IC
Pair Trading with Dow Jones and First IC
The main advantage of trading using opposite Dow Jones and First IC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, First IC 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 IC will offset losses from the drop in First IC's long position.| Dow Jones vs. Asure Software | Dow Jones vs. Amkor Technology | Dow Jones vs. Radcom | Dow Jones vs. Senmiao Technology |
| First IC vs. CCFNB Bancorp | First IC vs. Glen Burnie Bancorp | First IC vs. Main Street Financial | First IC vs. Enterprise Financial Services |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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