Correlation Between Dow Jones and Flexible Solutions
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Flexible Solutions 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 Flexible Solutions 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 Flexible Solutions International, you can compare the effects of market volatilities on Dow Jones and Flexible Solutions 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 Flexible Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Flexible Solutions.
Diversification Opportunities for Dow Jones and Flexible Solutions
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Flexible is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of Dow Jones i.e., Dow Jones and Flexible Solutions go up and down completely randomly.
Pair Corralation between Dow Jones and Flexible Solutions
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.98 times less return on investment than Flexible Solutions. But when comparing it to its historical volatility, Dow Jones Industrial is 5.92 times less risky than Flexible Solutions. It trades about 0.08 of its potential returns per unit of risk. Flexible Solutions International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 293.00 in Flexible Solutions International on November 7, 2024 and sell it today you would earn a total of 334.00 from holding Flexible Solutions International or generate 113.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. Flexible Solutions Internation
Performance |
| Timeline |
Dow Jones and Flexible Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Flexible Solutions International
Pair trading matchups for Flexible Solutions
Pair Trading with Dow Jones and Flexible Solutions
The main advantage of trading using opposite Dow Jones and Flexible Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Flexible Solutions 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 Flexible Solutions will offset losses from the drop in Flexible Solutions' long position.| Dow Jones vs. Mako Mining Corp | Dow Jones vs. Reyna Silver Corp | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Trupanion |
| Flexible Solutions vs. Orion Engineered Carbons | Flexible Solutions vs. International Flavors Fragrances | Flexible Solutions vs. Sociedad Quimica y | Flexible Solutions vs. Albemarle 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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