Correlation Between Dow Jones and Fredonia Mining
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Fredonia Mining 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 Fredonia Mining 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 Fredonia Mining, you can compare the effects of market volatilities on Dow Jones and Fredonia Mining 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 Fredonia Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Fredonia Mining.
Diversification Opportunities for Dow Jones and Fredonia Mining
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Fredonia is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Fredonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fredonia Mining 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 Fredonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fredonia Mining has no effect on the direction of Dow Jones i.e., Dow Jones and Fredonia Mining go up and down completely randomly.
Pair Corralation between Dow Jones and Fredonia Mining
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.1 times more return on investment than Fredonia Mining. However, Dow Jones Industrial is 10.36 times less risky than Fredonia Mining. It trades about -0.14 of its potential returns per unit of risk. Fredonia Mining is currently generating about -0.16 per unit of risk. If you would invest 4,387,035 in Dow Jones Industrial on September 22, 2024 and sell it today you would lose (103,009) from holding Dow Jones Industrial or give up 2.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Fredonia Mining
Performance |
| Timeline |
Dow Jones and Fredonia Mining Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Fredonia Mining
Pair trading matchups for Fredonia Mining
Pair Trading with Dow Jones and Fredonia Mining
The main advantage of trading using opposite Dow Jones and Fredonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Fredonia Mining 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 Fredonia Mining will offset losses from the drop in Fredonia Mining's long position.| Dow Jones vs. Hurco Companies | Dow Jones vs. Sabre Corpo | Dow Jones vs. Glacier Bancorp | Dow Jones vs. Barings BDC |
| Fredonia Mining vs. Canso Select Opportunities | Fredonia Mining vs. Exco Technologies Limited | Fredonia Mining vs. Precious Metals And | Fredonia Mining vs. Lion One Metals |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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