Correlation Between Dow Jones and Farmhouse
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Farmhouse 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 Farmhouse 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 Farmhouse, you can compare the effects of market volatilities on Dow Jones and Farmhouse 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 Farmhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Farmhouse.
Diversification Opportunities for Dow Jones and Farmhouse
Very good diversification
The 3 months correlation between Dow and Farmhouse is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Farmhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmhouse 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 Farmhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmhouse has no effect on the direction of Dow Jones i.e., Dow Jones and Farmhouse go up and down completely randomly.
Pair Corralation between Dow Jones and Farmhouse
Assuming the 90 days trading horizon Dow Jones is expected to generate 17.5 times less return on investment than Farmhouse. But when comparing it to its historical volatility, Dow Jones Industrial is 31.08 times less risky than Farmhouse. It trades about 0.16 of its potential returns per unit of risk. Farmhouse is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 18.00 in Farmhouse on September 1, 2024 and sell it today you would earn a total of 4.00 from holding Farmhouse or generate 22.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Dow Jones Industrial vs. Farmhouse
Performance |
| Timeline |
Dow Jones and Farmhouse Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Farmhouse
Pair trading matchups for Farmhouse
Pair Trading with Dow Jones and Farmhouse
The main advantage of trading using opposite Dow Jones and Farmhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Farmhouse 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 Farmhouse will offset losses from the drop in Farmhouse's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Farmhouse vs. Powerstorm Holdings | Farmhouse vs. Phonex Inc | Farmhouse vs. Greystone Logistics | Farmhouse vs. Fortran Corp |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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