Correlation Between Dow Jones and Illumina
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Illumina 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 Illumina 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 Illumina, you can compare the effects of market volatilities on Dow Jones and Illumina 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 Illumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Illumina.
Diversification Opportunities for Dow Jones and Illumina
Poor diversification
The 3 months correlation between Dow and Illumina is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina 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 Illumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illumina has no effect on the direction of Dow Jones i.e., Dow Jones and Illumina go up and down completely randomly.
Pair Corralation between Dow Jones and Illumina
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.31 times more return on investment than Illumina. However, Dow Jones Industrial is 3.27 times less risky than Illumina. It trades about 0.1 of its potential returns per unit of risk. Illumina is currently generating about 0.02 per unit of risk. If you would invest 3,899,639 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 530,012 from holding Dow Jones Industrial or generate 13.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Illumina
Performance |
| Timeline |
Dow Jones and Illumina Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Illumina
Pair trading matchups for Illumina
Pair Trading with Dow Jones and Illumina
The main advantage of trading using opposite Dow Jones and Illumina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Illumina 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 Illumina will offset losses from the drop in Illumina's long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| Illumina vs. Thermo Fisher Scientific | Illumina vs. Danaher | Illumina vs. Waters | Illumina vs. IDEXX Laboratories |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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