Correlation Between Dow Jones and Illuvium
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Illuvium 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 Illuvium 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 Illuvium, you can compare the effects of market volatilities on Dow Jones and Illuvium 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 Illuvium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Illuvium.
Diversification Opportunities for Dow Jones and Illuvium
Significant diversification
The 3 months correlation between Dow and Illuvium is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Illuvium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illuvium 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 Illuvium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illuvium has no effect on the direction of Dow Jones i.e., Dow Jones and Illuvium go up and down completely randomly.
Pair Corralation between Dow Jones and Illuvium
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.09 times more return on investment than Illuvium. However, Dow Jones Industrial is 10.69 times less risky than Illuvium. It trades about 0.2 of its potential returns per unit of risk. Illuvium is currently generating about -0.43 per unit of risk. If you would invest 4,348,783 in Dow Jones Industrial on November 18, 2024 and sell it today you would earn a total of 105,825 from holding Dow Jones Industrial or generate 2.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Illuvium
Performance |
| Timeline |
Dow Jones and Illuvium Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Illuvium
Pair trading matchups for Illuvium
Pair Trading with Dow Jones and Illuvium
The main advantage of trading using opposite Dow Jones and Illuvium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Illuvium 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 Illuvium will offset losses from the drop in Illuvium's long position.| Dow Jones vs. Palomar Holdings | Dow Jones vs. Mesa Air Group | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Unum Group |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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