Correlation Between Dow Jones and Garmin
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Garmin 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 Garmin 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 Garmin, you can compare the effects of market volatilities on Dow Jones and Garmin 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 Garmin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Garmin.
Diversification Opportunities for Dow Jones and Garmin
Poor diversification
The 3 months correlation between Dow and Garmin is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Garmin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garmin 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 Garmin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garmin has no effect on the direction of Dow Jones i.e., Dow Jones and Garmin go up and down completely randomly.
Pair Corralation between Dow Jones and Garmin
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.84 times more return on investment than Garmin. However, Dow Jones Industrial is 1.19 times less risky than Garmin. It trades about 0.33 of its potential returns per unit of risk. Garmin is currently generating about 0.22 per unit of risk. If you would invest 4,263,520 in Dow Jones Industrial on November 9, 2024 and sell it today you would earn a total of 211,243 from holding Dow Jones Industrial or generate 4.95% 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. Garmin
Performance |
| Timeline |
Dow Jones and Garmin Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Garmin
Pair trading matchups for Garmin
Pair Trading with Dow Jones and Garmin
The main advantage of trading using opposite Dow Jones and Garmin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Garmin 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 Garmin will offset losses from the drop in Garmin's long position.| Dow Jones vs. Douglas Emmett | Dow Jones vs. Todos Medical | Dow Jones vs. Eastern Co | Dow Jones vs. Merit Medical Systems |
| Garmin vs. Vontier Corp | Garmin vs. Teledyne Technologies Incorporated | Garmin vs. ESCO Technologies | Garmin vs. MKS Instruments |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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