Correlation Between Dow Jones and Golden Grail
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Golden Grail 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 Golden Grail 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 Golden Grail Technology, you can compare the effects of market volatilities on Dow Jones and Golden Grail 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 Golden Grail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Golden Grail.
Diversification Opportunities for Dow Jones and Golden Grail
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and Golden is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Golden Grail Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Grail Technology 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 Golden Grail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Grail Technology has no effect on the direction of Dow Jones i.e., Dow Jones and Golden Grail go up and down completely randomly.
Pair Corralation between Dow Jones and Golden Grail
Assuming the 90 days trading horizon Dow Jones is expected to generate 5.15 times less return on investment than Golden Grail. But when comparing it to its historical volatility, Dow Jones Industrial is 13.49 times less risky than Golden Grail. It trades about 0.37 of its potential returns per unit of risk. Golden Grail Technology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3.22 in Golden Grail Technology on September 1, 2024 and sell it today you would earn a total of 0.78 from holding Golden Grail Technology or generate 24.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Golden Grail Technology
Performance |
| Timeline |
Dow Jones and Golden Grail Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Golden Grail Technology
Pair trading matchups for Golden Grail
Pair Trading with Dow Jones and Golden Grail
The main advantage of trading using opposite Dow Jones and Golden Grail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Golden Grail 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 Golden Grail will offset losses from the drop in Golden Grail's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Golden Grail vs. Tencent Holdings | Golden Grail vs. Autohome | Golden Grail vs. Arena Group Holdings | Golden Grail vs. Asset Entities Class |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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