Correlation Between Dow Jones and Happy Creek
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Happy Creek 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 Happy Creek 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 Happy Creek Minerals, you can compare the effects of market volatilities on Dow Jones and Happy Creek 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 Happy Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Happy Creek.
Diversification Opportunities for Dow Jones and Happy Creek
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Happy is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Happy Creek Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Happy Creek Minerals 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 Happy Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Happy Creek Minerals has no effect on the direction of Dow Jones i.e., Dow Jones and Happy Creek go up and down completely randomly.
Pair Corralation between Dow Jones and Happy Creek
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Happy Creek. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 21.3 times less risky than Happy Creek. The index trades about -0.01 of its potential returns per unit of risk. The Happy Creek Minerals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5.00 in Happy Creek Minerals on September 12, 2024 and sell it today you would lose (0.50) from holding Happy Creek Minerals or give up 10.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Happy Creek Minerals
Performance |
| Timeline |
Dow Jones and Happy Creek Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Happy Creek Minerals
Pair trading matchups for Happy Creek
Pair Trading with Dow Jones and Happy Creek
The main advantage of trading using opposite Dow Jones and Happy Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Happy Creek 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 Happy Creek will offset losses from the drop in Happy Creek's long position.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
| Happy Creek vs. Information Services | Happy Creek vs. Canlan Ice Sports | Happy Creek vs. Verizon Communications CDR | Happy Creek vs. Rogers Communications |
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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