Correlation Between Dow Jones and Green Star
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Green Star 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 Green Star 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 Green Star Products, you can compare the effects of market volatilities on Dow Jones and Green Star 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 Green Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Green Star.
Diversification Opportunities for Dow Jones and Green Star
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and Green is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Green Star Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Star Products 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 Green Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Star Products has no effect on the direction of Dow Jones i.e., Dow Jones and Green Star go up and down completely randomly.
Pair Corralation between Dow Jones and Green Star
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.07 times more return on investment than Green Star. However, Dow Jones Industrial is 14.4 times less risky than Green Star. It trades about 0.24 of its potential returns per unit of risk. Green Star Products is currently generating about -0.08 per unit of risk. If you would invest 4,211,440 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 218,211 from holding Dow Jones Industrial or generate 5.18% 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. Green Star Products
Performance |
| Timeline |
Dow Jones and Green Star Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Green Star Products
Pair trading matchups for Green Star
Pair Trading with Dow Jones and Green Star
The main advantage of trading using opposite Dow Jones and Green Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Green Star 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 Green Star will offset losses from the drop in Green Star's long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| Green Star vs. Iofina plc | Green Star vs. Greystone Logistics | Green Star vs. Crown Electrokinetics Corp | Green Star vs. Orica Ltd ADR |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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