Correlation Between Dow Jones and FinVolution
Can any of the company-specific risk be diversified away by investing in both Dow Jones and FinVolution 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 FinVolution 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 FinVolution Group, you can compare the effects of market volatilities on Dow Jones and FinVolution 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 FinVolution. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and FinVolution.
Diversification Opportunities for Dow Jones and FinVolution
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and FinVolution is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and FinVolution Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FinVolution Group 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 FinVolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FinVolution Group has no effect on the direction of Dow Jones i.e., Dow Jones and FinVolution go up and down completely randomly.
Pair Corralation between Dow Jones and FinVolution
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.74 times less return on investment than FinVolution. But when comparing it to its historical volatility, Dow Jones Industrial is 2.37 times less risky than FinVolution. It trades about 0.29 of its potential returns per unit of risk. FinVolution Group is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 600.00 in FinVolution Group on August 31, 2024 and sell it today you would earn a total of 63.00 from holding FinVolution Group or generate 10.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. FinVolution Group
Performance |
| Timeline |
Dow Jones and FinVolution Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
FinVolution Group
Pair trading matchups for FinVolution
Pair Trading with Dow Jones and FinVolution
The main advantage of trading using opposite Dow Jones and FinVolution positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, FinVolution 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 FinVolution will offset losses from the drop in FinVolution'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 |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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