Correlation Between Dow Jones and Huaneng Power
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Huaneng Power 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 Huaneng Power 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 Huaneng Power International, you can compare the effects of market volatilities on Dow Jones and Huaneng Power 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 Huaneng Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Huaneng Power.
Diversification Opportunities for Dow Jones and Huaneng Power
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Huaneng is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Huaneng Power International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaneng Power Intern 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 Huaneng Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaneng Power Intern has no effect on the direction of Dow Jones i.e., Dow Jones and Huaneng Power go up and down completely randomly.
Pair Corralation between Dow Jones and Huaneng Power
Assuming the 90 days trading horizon Dow Jones is expected to generate 19.51 times less return on investment than Huaneng Power. But when comparing it to its historical volatility, Dow Jones Industrial is 22.93 times less risky than Huaneng Power. It trades about 0.11 of its potential returns per unit of risk. Huaneng Power International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 33.00 in Huaneng Power International on August 28, 2024 and sell it today you would earn a total of 19.00 from holding Huaneng Power International or generate 57.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 81.34% |
| Values | Daily Returns |
Dow Jones Industrial vs. Huaneng Power International
Performance |
| Timeline |
Dow Jones and Huaneng Power Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Huaneng Power International
Pair trading matchups for Huaneng Power
Pair Trading with Dow Jones and Huaneng Power
The main advantage of trading using opposite Dow Jones and Huaneng Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Huaneng Power 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 Huaneng Power will offset losses from the drop in Huaneng Power'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 |
| Huaneng Power vs. Maxim Power Corp | Huaneng Power vs. Pampa Energia SA | Huaneng Power vs. NRG Energy | Huaneng Power vs. Vistra Energy 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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