Correlation Between Dow Jones and Defense And
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Defense And 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 Defense And 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 Defense And Aerospace, you can compare the effects of market volatilities on Dow Jones and Defense And 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 Defense And. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Defense And.
Diversification Opportunities for Dow Jones and Defense And
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Defense is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Defense And Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defense And Aerospace 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 Defense And. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defense And Aerospace has no effect on the direction of Dow Jones i.e., Dow Jones and Defense And go up and down completely randomly.
Pair Corralation between Dow Jones and Defense And
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.71 times more return on investment than Defense And. However, Dow Jones Industrial is 1.41 times less risky than Defense And. It trades about 0.37 of its potential returns per unit of risk. Defense And Aerospace is currently generating about 0.23 per unit of risk. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Defense And Aerospace
Performance |
| Timeline |
Dow Jones and Defense And Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Defense And Aerospace
Pair trading matchups for Defense And
Pair Trading with Dow Jones and Defense And
The main advantage of trading using opposite Dow Jones and Defense And positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Defense And 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 Defense And will offset losses from the drop in Defense And's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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