Correlation Between Dow Jones and New Germany
Can any of the company-specific risk be diversified away by investing in both Dow Jones and New Germany 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 New Germany 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 New Germany Closed, you can compare the effects of market volatilities on Dow Jones and New Germany 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 New Germany. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and New Germany.
Diversification Opportunities for Dow Jones and New Germany
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and New is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and New Germany Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Germany Closed 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 New Germany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Germany Closed has no effect on the direction of Dow Jones i.e., Dow Jones and New Germany go up and down completely randomly.
Pair Corralation between Dow Jones and New Germany
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.71 times more return on investment than New Germany. However, Dow Jones Industrial is 1.42 times less risky than New Germany. It trades about 0.11 of its potential returns per unit of risk. New Germany Closed is currently generating about -0.02 per unit of risk. If you would invest 3,356,181 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 1,116,025 from holding Dow Jones Industrial or generate 33.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. New Germany Closed
Performance |
| Timeline |
Dow Jones and New Germany Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
New Germany Closed
Pair trading matchups for New Germany
Pair Trading with Dow Jones and New Germany
The main advantage of trading using opposite Dow Jones and New Germany positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, New Germany 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 New Germany will offset losses from the drop in New Germany's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| New Germany vs. MFS Investment Grade | New Germany vs. Eaton Vance Municipal | New Germany vs. DTF Tax Free | New Germany vs. HUMANA INC |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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