Correlation Between Dow Jones and Flowserve

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Flowserve 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 Flowserve 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 Flowserve, you can compare the effects of market volatilities on Dow Jones and Flowserve 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 Flowserve. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Flowserve.

Diversification Opportunities for Dow Jones and Flowserve

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Dow and Flowserve is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Flowserve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowserve 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 Flowserve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowserve has no effect on the direction of Dow Jones i.e., Dow Jones and Flowserve go up and down completely randomly.
    Optimize

Pair Corralation between Dow Jones and Flowserve

Assuming the 90 days trading horizon Dow Jones is expected to generate 3.38 times less return on investment than Flowserve. But when comparing it to its historical volatility, Dow Jones Industrial is 2.24 times less risky than Flowserve. It trades about 0.16 of its potential returns per unit of risk. Flowserve is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  5,137  in Flowserve on August 28, 2024 and sell it today you would earn a total of  1,048  from holding Flowserve or generate 20.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Dow Jones Industrial  vs.  Flowserve

 Performance 
       Timeline  

Dow Jones and Flowserve Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dow Jones and Flowserve

The main advantage of trading using opposite Dow Jones and Flowserve positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Flowserve 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 Flowserve will offset losses from the drop in Flowserve's long position.
The idea behind Dow Jones Industrial and Flowserve pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

Other Complementary Tools

Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Price Transformation
Use Price Transformation models to analyze the depth of different equity instruments across global markets
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.