Correlation Between Dow Jones and Medical Equipment
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Medical Equipment 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 Medical Equipment 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 Medical Equipment And, you can compare the effects of market volatilities on Dow Jones and Medical Equipment 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 Medical Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Medical Equipment.
Diversification Opportunities for Dow Jones and Medical Equipment
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Medical is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Medical Equipment And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Equipment And 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 Medical Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Equipment And has no effect on the direction of Dow Jones i.e., Dow Jones and Medical Equipment go up and down completely randomly.
Pair Corralation between Dow Jones and Medical Equipment
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.71 times more return on investment than Medical Equipment. However, Dow Jones Industrial is 1.42 times less risky than Medical Equipment. It trades about 0.08 of its potential returns per unit of risk. Medical Equipment And is currently generating about 0.02 per unit of risk. If you would invest 3,410,864 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 1,080,201 from holding Dow Jones Industrial or generate 31.67% 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. Medical Equipment And
Performance |
| Timeline |
Dow Jones and Medical Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Medical Equipment And
Pair trading matchups for Medical Equipment
Pair Trading with Dow Jones and Medical Equipment
The main advantage of trading using opposite Dow Jones and Medical Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Medical Equipment 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 Medical Equipment will offset losses from the drop in Medical Equipment's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| Medical Equipment vs. Software And It | Medical Equipment vs. Health Care Services | Medical Equipment vs. Retailing Portfolio Retailing | Medical Equipment vs. Health Care Portfolio |
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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