Correlation Between Dow Jones and GREENLIGHT CAP
Can any of the company-specific risk be diversified away by investing in both Dow Jones and GREENLIGHT CAP 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 GREENLIGHT CAP 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 GREENLIGHT CAP RE, you can compare the effects of market volatilities on Dow Jones and GREENLIGHT CAP 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 GREENLIGHT CAP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and GREENLIGHT CAP.
Diversification Opportunities for Dow Jones and GREENLIGHT CAP
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and GREENLIGHT is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and GREENLIGHT CAP RE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GREENLIGHT CAP RE 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 GREENLIGHT CAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GREENLIGHT CAP RE has no effect on the direction of Dow Jones i.e., Dow Jones and GREENLIGHT CAP go up and down completely randomly.
Pair Corralation between Dow Jones and GREENLIGHT CAP
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.5 times more return on investment than GREENLIGHT CAP. However, Dow Jones Industrial is 2.0 times less risky than GREENLIGHT CAP. It trades about 0.32 of its potential returns per unit of risk. GREENLIGHT CAP RE is currently generating about -0.07 per unit of risk. If you would invest 4,257,373 in Dow Jones Industrial on October 29, 2024 and sell it today you would earn a total of 185,052 from holding Dow Jones Industrial or generate 4.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Dow Jones Industrial vs. GREENLIGHT CAP RE
Performance |
| Timeline |
Dow Jones and GREENLIGHT CAP Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
GREENLIGHT CAP RE
Pair trading matchups for GREENLIGHT CAP
Pair Trading with Dow Jones and GREENLIGHT CAP
The main advantage of trading using opposite Dow Jones and GREENLIGHT CAP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, GREENLIGHT CAP 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 GREENLIGHT CAP will offset losses from the drop in GREENLIGHT CAP's long position.| Dow Jones vs. Lion One Metals | Dow Jones vs. PennantPark Floating Rate | Dow Jones vs. TFI International | Dow Jones vs. United Guardian |
| GREENLIGHT CAP vs. TELECOM ITALIA | GREENLIGHT CAP vs. FRACTAL GAMING GROUP | GREENLIGHT CAP vs. HUTCHISON TELECOMM | GREENLIGHT CAP vs. Scientific Games |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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