Correlation Between Dow Jones and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Guangdong Investment 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 Guangdong Investment 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 Guangdong Investment Limited, you can compare the effects of market volatilities on Dow Jones and Guangdong Investment 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 Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Guangdong Investment.
Diversification Opportunities for Dow Jones and Guangdong Investment
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Guangdong is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Dow Jones i.e., Dow Jones and Guangdong Investment go up and down completely randomly.
Pair Corralation between Dow Jones and Guangdong Investment
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.79 times less return on investment than Guangdong Investment. But when comparing it to its historical volatility, Dow Jones Industrial is 9.02 times less risky than Guangdong Investment. It trades about 0.11 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 76.00 in Guangdong Investment Limited on August 31, 2024 and sell it today you would lose (15.00) from holding Guangdong Investment Limited or give up 19.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.97% |
| Values | Daily Returns |
Dow Jones Industrial vs. Guangdong Investment Limited
Performance |
| Timeline |
Dow Jones and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Guangdong Investment Limited
Pair trading matchups for Guangdong Investment
Pair Trading with Dow Jones and Guangdong Investment
The main advantage of trading using opposite Dow Jones and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment'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 |
| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Endesa SA ADR | Guangdong Investment 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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