Correlation Between Dow Jones and HEINEKEN
Can any of the company-specific risk be diversified away by investing in both Dow Jones and HEINEKEN 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 HEINEKEN 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 HEINEKEN SP ADR, you can compare the effects of market volatilities on Dow Jones and HEINEKEN 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 HEINEKEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and HEINEKEN.
Diversification Opportunities for Dow Jones and HEINEKEN
Pay attention - limited upside
The 3 months correlation between Dow and HEINEKEN is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and HEINEKEN SP ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEINEKEN SP ADR 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 HEINEKEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEINEKEN SP ADR has no effect on the direction of Dow Jones i.e., Dow Jones and HEINEKEN go up and down completely randomly.
Pair Corralation between Dow Jones and HEINEKEN
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.9 times more return on investment than HEINEKEN. However, Dow Jones Industrial is 1.11 times less risky than HEINEKEN. It trades about 0.37 of its potential returns per unit of risk. HEINEKEN SP ADR is currently generating about -0.36 per unit of risk. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. HEINEKEN SP ADR
Performance |
| Timeline |
Dow Jones and HEINEKEN Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
HEINEKEN SP ADR
Pair trading matchups for HEINEKEN
Pair Trading with Dow Jones and HEINEKEN
The main advantage of trading using opposite Dow Jones and HEINEKEN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, HEINEKEN 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 HEINEKEN will offset losses from the drop in HEINEKEN's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| HEINEKEN vs. INDOFOOD AGRI RES | HEINEKEN vs. Cleanaway Waste Management | HEINEKEN vs. Beyond Meat | HEINEKEN vs. AUSNUTRIA DAIRY |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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