Correlation Between Dow Jones and Essentra Plc
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Essentra Plc 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 Essentra Plc 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 Essentra Plc, you can compare the effects of market volatilities on Dow Jones and Essentra Plc 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 Essentra Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Essentra Plc.
Diversification Opportunities for Dow Jones and Essentra Plc
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Essentra is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Essentra Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essentra Plc 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 Essentra Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essentra Plc has no effect on the direction of Dow Jones i.e., Dow Jones and Essentra Plc go up and down completely randomly.
Pair Corralation between Dow Jones and Essentra Plc
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.14 times less return on investment than Essentra Plc. But when comparing it to its historical volatility, Dow Jones Industrial is 3.33 times less risky than Essentra Plc. It trades about 0.13 of its potential returns per unit of risk. Essentra Plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 196.00 in Essentra Plc on September 2, 2024 and sell it today you would earn a total of 19.00 from holding Essentra Plc or generate 9.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 50.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Essentra Plc
Performance |
| Timeline |
Dow Jones and Essentra Plc Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Essentra Plc
Pair trading matchups for Essentra Plc
Pair Trading with Dow Jones and Essentra Plc
The main advantage of trading using opposite Dow Jones and Essentra Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Essentra Plc 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 Essentra Plc will offset losses from the drop in Essentra Plc's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| Essentra Plc vs. LyondellBasell Industries NV | Essentra Plc vs. International Flavors Fragrances | Essentra Plc vs. Cabot | Essentra Plc vs. Westlake Chemical |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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