Correlation Between Dow Jones and Globex Mining
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Globex Mining 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 Globex Mining 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 Globex Mining Enterprises, you can compare the effects of market volatilities on Dow Jones and Globex Mining 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 Globex Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Globex Mining.
Diversification Opportunities for Dow Jones and Globex Mining
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Globex is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Globex Mining Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globex Mining Enterprises 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 Globex Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globex Mining Enterprises has no effect on the direction of Dow Jones i.e., Dow Jones and Globex Mining go up and down completely randomly.
Pair Corralation between Dow Jones and Globex Mining
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.36 times more return on investment than Globex Mining. However, Dow Jones Industrial is 2.8 times less risky than Globex Mining. It trades about 0.15 of its potential returns per unit of risk. Globex Mining Enterprises is currently generating about 0.03 per unit of risk. If you would invest 3,868,632 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 603,574 from holding Dow Jones Industrial or generate 15.6% 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. Globex Mining Enterprises
Performance |
| Timeline |
Dow Jones and Globex Mining Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Globex Mining Enterprises
Pair trading matchups for Globex Mining
Pair Trading with Dow Jones and Globex Mining
The main advantage of trading using opposite Dow Jones and Globex Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Globex Mining 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 Globex Mining will offset losses from the drop in Globex Mining's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Globex Mining vs. Silver Hammer Mining | Globex Mining vs. Reyna Silver Corp | Globex Mining vs. Guanajuato Silver | Globex Mining vs. Silver One Resources |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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