Correlation Between Dow Jones and Guillemot
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Guillemot 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 Guillemot 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 Guillemot SA, you can compare the effects of market volatilities on Dow Jones and Guillemot 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 Guillemot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Guillemot.
Diversification Opportunities for Dow Jones and Guillemot
Poor diversification
The 3 months correlation between Dow and Guillemot is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Guillemot SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guillemot SA 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 Guillemot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guillemot SA has no effect on the direction of Dow Jones i.e., Dow Jones and Guillemot go up and down completely randomly.
Pair Corralation between Dow Jones and Guillemot
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.24 times more return on investment than Guillemot. However, Dow Jones Industrial is 4.18 times less risky than Guillemot. It trades about 0.13 of its potential returns per unit of risk. Guillemot SA is currently generating about 0.01 per unit of risk. If you would invest 3,624,787 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 853,413 from holding Dow Jones Industrial or generate 23.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Dow Jones Industrial vs. Guillemot SA
Performance |
| Timeline |
Dow Jones and Guillemot Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Guillemot SA
Pair trading matchups for Guillemot
Pair Trading with Dow Jones and Guillemot
The main advantage of trading using opposite Dow Jones and Guillemot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Guillemot 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 Guillemot will offset losses from the drop in Guillemot's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| Guillemot vs. Claranova SE | Guillemot vs. SA Catana Group | Guillemot vs. Neurones | Guillemot vs. Groupe Guillin SA |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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