Correlation Between Dow Jones and Gencor Industries
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Gencor Industries 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 Gencor Industries 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 Gencor Industries, you can compare the effects of market volatilities on Dow Jones and Gencor Industries 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 Gencor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Gencor Industries.
Diversification Opportunities for Dow Jones and Gencor Industries
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Gencor is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Gencor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gencor Industries 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 Gencor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gencor Industries has no effect on the direction of Dow Jones i.e., Dow Jones and Gencor Industries go up and down completely randomly.
Pair Corralation between Dow Jones and Gencor Industries
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.29 times more return on investment than Gencor Industries. However, Dow Jones Industrial is 3.46 times less risky than Gencor Industries. It trades about 0.02 of its potential returns per unit of risk. Gencor Industries is currently generating about -0.22 per unit of risk. If you would invest 4,326,894 in Dow Jones Industrial on October 20, 2024 and sell it today you would earn a total of 21,889 from holding Dow Jones Industrial or generate 0.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 97.62% |
Values | Daily Returns |
Dow Jones Industrial vs. Gencor Industries
Performance |
Timeline |
Dow Jones and Gencor Industries Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Gencor Industries
Pair trading matchups for Gencor Industries
Pair Trading with Dow Jones and Gencor Industries
The main advantage of trading using opposite Dow Jones and Gencor Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Gencor Industries 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 Gencor Industries will offset losses from the drop in Gencor Industries' long position.Dow Jones vs. SkyWest | Dow Jones vs. Air Transport Services | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Emerson Radio |
Gencor Industries vs. Alamo Group | Gencor Industries vs. Manitowoc | Gencor Industries vs. Columbus McKinnon | Gencor Industries vs. Rev Group |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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