Correlation Between Dow Jones and ITM Power
Can any of the company-specific risk be diversified away by investing in both Dow Jones and ITM 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 ITM 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 ITM Power Plc, you can compare the effects of market volatilities on Dow Jones and ITM 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 ITM Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ITM Power.
Diversification Opportunities for Dow Jones and ITM Power
Pay attention - limited upside
The 3 months correlation between Dow and ITM is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ITM Power Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Power Plc 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 ITM Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Power Plc has no effect on the direction of Dow Jones i.e., Dow Jones and ITM Power go up and down completely randomly.
Pair Corralation between Dow Jones and ITM Power
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.17 times more return on investment than ITM Power. However, Dow Jones Industrial is 5.72 times less risky than ITM Power. It trades about 0.37 of its potential returns per unit of risk. ITM Power Plc is currently generating about -0.12 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 | 91.3% |
| Values | Daily Returns |
Dow Jones Industrial vs. ITM Power Plc
Performance |
| Timeline |
Dow Jones and ITM Power Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
ITM Power Plc
Pair trading matchups for ITM Power
Pair Trading with Dow Jones and ITM Power
The main advantage of trading using opposite Dow Jones and ITM Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, ITM 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 ITM Power will offset losses from the drop in ITM Power's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| ITM Power vs. Nel ASA | ITM Power vs. Powercell Sweden | ITM Power vs. Ballard Power Systems | ITM Power vs. Plug Power |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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