Correlation Between Dow Jones and Chainflip
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Chainflip 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 Chainflip 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 Chainflip, you can compare the effects of market volatilities on Dow Jones and Chainflip 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 Chainflip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Chainflip.
Diversification Opportunities for Dow Jones and Chainflip
Poor diversification
The 3 months correlation between Dow and Chainflip is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Chainflip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chainflip 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 Chainflip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chainflip has no effect on the direction of Dow Jones i.e., Dow Jones and Chainflip go up and down completely randomly.
Pair Corralation between Dow Jones and Chainflip
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Chainflip. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 20.44 times less risky than Chainflip. The index trades about -0.01 of its potential returns per unit of risk. The Chainflip is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 149.00 in Chainflip on September 12, 2024 and sell it today you would earn a total of 66.00 from holding Chainflip or generate 44.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Dow Jones Industrial vs. Chainflip
Performance |
| Timeline |
Dow Jones and Chainflip Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Chainflip
Pair trading matchups for Chainflip
Pair Trading with Dow Jones and Chainflip
The main advantage of trading using opposite Dow Jones and Chainflip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Chainflip 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 Chainflip will offset losses from the drop in Chainflip's long position.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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