Correlation Between Dow Jones and INX Digital
Can any of the company-specific risk be diversified away by investing in both Dow Jones and INX Digital 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 INX Digital 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 The INX Digital, you can compare the effects of market volatilities on Dow Jones and INX Digital 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 INX Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and INX Digital.
Diversification Opportunities for Dow Jones and INX Digital
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dow and INX is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and The INX Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INX Digital 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 INX Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INX Digital has no effect on the direction of Dow Jones i.e., Dow Jones and INX Digital go up and down completely randomly.
Pair Corralation between Dow Jones and INX Digital
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.24 times less return on investment than INX Digital. But when comparing it to its historical volatility, Dow Jones Industrial is 12.84 times less risky than INX Digital. It trades about 0.3 of its potential returns per unit of risk. The INX Digital is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5.06 in The INX Digital on August 31, 2024 and sell it today you would earn a total of 0.30 from holding The INX Digital or generate 5.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. The INX Digital
Performance |
| Timeline |
Dow Jones and INX Digital Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
The INX Digital
Pair trading matchups for INX Digital
Pair Trading with Dow Jones and INX Digital
The main advantage of trading using opposite Dow Jones and INX Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, INX Digital 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 INX Digital will offset losses from the drop in INX Digital's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| INX Digital vs. Waldencast Acquisition Corp | INX Digital vs. Alkami Technology | INX Digital vs. ADEIA P | INX Digital vs. Paycor HCM |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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