Correlation Between Dow Jones and International Metals
Can any of the company-specific risk be diversified away by investing in both Dow Jones and International Metals 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 International Metals 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 International Metals Mining, you can compare the effects of market volatilities on Dow Jones and International Metals 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 International Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and International Metals.
Diversification Opportunities for Dow Jones and International Metals
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and International is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and International Metals Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Metals 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 International Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Metals has no effect on the direction of Dow Jones i.e., Dow Jones and International Metals go up and down completely randomly.
Pair Corralation between Dow Jones and International Metals
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.15 times more return on investment than International Metals. However, Dow Jones Industrial is 6.55 times less risky than International Metals. It trades about -0.3 of its potential returns per unit of risk. International Metals Mining is currently generating about -0.11 per unit of risk. If you would invest 4,473,657 in Dow Jones Industrial on September 24, 2024 and sell it today you would lose (189,631) from holding Dow Jones Industrial or give up 4.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Dow Jones Industrial vs. International Metals Mining
Performance |
| Timeline |
Dow Jones and International Metals Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
International Metals Mining
Pair trading matchups for International Metals
Pair Trading with Dow Jones and International Metals
The main advantage of trading using opposite Dow Jones and International Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, International Metals 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 International Metals will offset losses from the drop in International Metals' long position.| Dow Jones vs. Teleflex Incorporated | Dow Jones vs. Sonida Senior Living | Dow Jones vs. Avadel Pharmaceuticals PLC | Dow Jones vs. Cardinal Health |
| International Metals vs. 2028 Investment Grade | International Metals vs. NeuPath Health | International Metals vs. Constellation Software | International Metals vs. Sparx Technology |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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