Correlation Between Dow Jones and First Internet
Can any of the company-specific risk be diversified away by investing in both Dow Jones and First Internet 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 First Internet 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 First Internet Bancorp, you can compare the effects of market volatilities on Dow Jones and First Internet 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 First Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and First Internet.
Diversification Opportunities for Dow Jones and First Internet
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and First Internet Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Internet Bancorp 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 First Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Internet Bancorp has no effect on the direction of Dow Jones i.e., Dow Jones and First Internet go up and down completely randomly.
Pair Corralation between Dow Jones and First Internet
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.85 times less return on investment than First Internet. But when comparing it to its historical volatility, Dow Jones Industrial is 4.66 times less risky than First Internet. It trades about 0.22 of its potential returns per unit of risk. First Internet Bancorp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,597 in First Internet Bancorp on August 27, 2024 and sell it today you would earn a total of 595.00 from holding First Internet Bancorp or generate 16.54% 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. First Internet Bancorp
Performance |
| Timeline |
Dow Jones and First Internet Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
First Internet Bancorp
Pair trading matchups for First Internet
Pair Trading with Dow Jones and First Internet
The main advantage of trading using opposite Dow Jones and First Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, First Internet 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 First Internet will offset losses from the drop in First Internet's long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| First Internet vs. First Capital | First Internet vs. Finward Bancorp | First Internet vs. Community West Bancshares | First Internet vs. QCR Holdings |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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