Correlation Between Dow Jones and Green Thumb
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Green Thumb 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 Thumb 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 Thumb Industries, you can compare the effects of market volatilities on Dow Jones and Green Thumb 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 Thumb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Green Thumb.
Diversification Opportunities for Dow Jones and Green Thumb
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Green is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Green Thumb Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Thumb Industries 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 Thumb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Thumb Industries has no effect on the direction of Dow Jones i.e., Dow Jones and Green Thumb go up and down completely randomly.
Pair Corralation between Dow Jones and Green Thumb
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.17 times more return on investment than Green Thumb. However, Dow Jones Industrial is 5.89 times less risky than Green Thumb. It trades about 0.11 of its potential returns per unit of risk. Green Thumb Industries is currently generating about -0.02 per unit of risk. If you would invest 3,815,030 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 658,627 from holding Dow Jones Industrial or generate 17.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Green Thumb Industries
Performance |
| Timeline |
Dow Jones and Green Thumb Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Green Thumb Industries
Pair trading matchups for Green Thumb
Pair Trading with Dow Jones and Green Thumb
The main advantage of trading using opposite Dow Jones and Green Thumb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Green Thumb 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 Thumb will offset losses from the drop in Green Thumb's long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| Green Thumb vs. Curaleaf Holdings | Green Thumb vs. Trulieve Cannabis Corp | Green Thumb vs. Cresco Labs | Green Thumb vs. GrowGeneration Corp |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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