Correlation Between Dow Jones and Iron
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Iron 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 Iron 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 Iron And Steel, you can compare the effects of market volatilities on Dow Jones and Iron 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 Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Iron.
Diversification Opportunities for Dow Jones and Iron
Modest diversification
The 3 months correlation between Dow and Iron is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Iron And Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron And Steel 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 Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron And Steel has no effect on the direction of Dow Jones i.e., Dow Jones and Iron go up and down completely randomly.
Pair Corralation between Dow Jones and Iron
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.39 times less return on investment than Iron. But when comparing it to its historical volatility, Dow Jones Industrial is 4.4 times less risky than Iron. It trades about 0.42 of its potential returns per unit of risk. Iron And Steel is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 405.00 in Iron And Steel on November 2, 2024 and sell it today you would earn a total of 25.00 from holding Iron And Steel or generate 6.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 84.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. Iron And Steel
Performance |
| Timeline |
Dow Jones and Iron Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Iron And Steel
Pair trading matchups for Iron
Pair Trading with Dow Jones and Iron
The main advantage of trading using opposite Dow Jones and Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Iron 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 Iron will offset losses from the drop in Iron's long position.| Dow Jones vs. Boston Properties | Dow Jones vs. Suntory Beverage Food | Dow Jones vs. Envista Holdings Corp | Dow Jones vs. Fevertree Drinks Plc |
| Iron vs. Misr Chemical Industries | Iron vs. Misr Financial Investments | Iron vs. Delta Insurance | Iron vs. Credit Agricole Egypt |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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