Correlation Between Dow Jones and FIT Hon
Can any of the company-specific risk be diversified away by investing in both Dow Jones and FIT Hon 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 FIT Hon 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 FIT Hon Teng, you can compare the effects of market volatilities on Dow Jones and FIT Hon 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 FIT Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and FIT Hon.
Diversification Opportunities for Dow Jones and FIT Hon
Poor diversification
The 3 months correlation between Dow and FIT is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and FIT Hon Teng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIT Hon Teng 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 FIT Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIT Hon Teng has no effect on the direction of Dow Jones i.e., Dow Jones and FIT Hon go up and down completely randomly.
Pair Corralation between Dow Jones and FIT Hon
Assuming the 90 days trading horizon Dow Jones is expected to generate 8.53 times less return on investment than FIT Hon. But when comparing it to its historical volatility, Dow Jones Industrial is 13.43 times less risky than FIT Hon. It trades about 0.09 of its potential returns per unit of risk. FIT Hon Teng is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 25.00 in FIT Hon Teng on August 31, 2024 and sell it today you would earn a total of 15.00 from holding FIT Hon Teng or generate 60.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Dow Jones Industrial vs. FIT Hon Teng
Performance |
| Timeline |
Dow Jones and FIT Hon Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
FIT Hon Teng
Pair trading matchups for FIT Hon
Pair Trading with Dow Jones and FIT Hon
The main advantage of trading using opposite Dow Jones and FIT Hon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, FIT Hon 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 FIT Hon will offset losses from the drop in FIT Hon'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 |
| FIT Hon vs. KULR Technology Group | FIT Hon vs. Ouster Inc | FIT Hon vs. MicroCloud Hologram | FIT Hon vs. Kopin |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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