Correlation Between Dow Jones and North American
Can any of the company-specific risk be diversified away by investing in both Dow Jones and North American 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 North American 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 North American Financial, you can compare the effects of market volatilities on Dow Jones and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and North American.
Diversification Opportunities for Dow Jones and North American
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and North is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Dow Jones i.e., Dow Jones and North American go up and down completely randomly.
Pair Corralation between Dow Jones and North American
Assuming the 90 days trading horizon Dow Jones is expected to generate 8.74 times less return on investment than North American. But when comparing it to its historical volatility, Dow Jones Industrial is 13.85 times less risky than North American. It trades about 0.12 of its potential returns per unit of risk. North American Financial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 313.00 in North American Financial on August 31, 2024 and sell it today you would earn a total of 229.00 from holding North American Financial or generate 73.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 58.29% |
| Values | Daily Returns |
Dow Jones Industrial vs. North American Financial
Performance |
| Timeline |
Dow Jones and North American Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
North American Financial
Pair trading matchups for North American
Pair Trading with Dow Jones and North American
The main advantage of trading using opposite Dow Jones and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, North American 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 North American will offset losses from the drop in North American'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 |
| North American vs. Blackhawk Growth Corp | North American vs. Guardian Capital Group | North American vs. Flow Capital Corp | North American vs. Princeton Capital |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |