Correlation Between Dow Jones and Jinhua Capital
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Jinhua Capital 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 Jinhua Capital 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 Jinhua Capital, you can compare the effects of market volatilities on Dow Jones and Jinhua Capital 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 Jinhua Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Jinhua Capital.
Diversification Opportunities for Dow Jones and Jinhua Capital
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and Jinhua is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Jinhua Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinhua Capital 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 Jinhua Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinhua Capital has no effect on the direction of Dow Jones i.e., Dow Jones and Jinhua Capital go up and down completely randomly.
Pair Corralation between Dow Jones and Jinhua Capital
Assuming the 90 days trading horizon Dow Jones is expected to generate 18.19 times less return on investment than Jinhua Capital. But when comparing it to its historical volatility, Dow Jones Industrial is 35.23 times less risky than Jinhua Capital. It trades about 0.26 of its potential returns per unit of risk. Jinhua Capital is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1.00 in Jinhua Capital on August 28, 2024 and sell it today you would earn a total of 0.00 from holding Jinhua Capital or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Jinhua Capital
Performance |
| Timeline |
Dow Jones and Jinhua Capital Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Jinhua Capital
Pair trading matchups for Jinhua Capital
Pair Trading with Dow Jones and Jinhua Capital
The main advantage of trading using opposite Dow Jones and Jinhua Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Jinhua Capital 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 Jinhua Capital will offset losses from the drop in Jinhua Capital'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 |
| Jinhua Capital vs. American Hotel Income | Jinhua Capital vs. Champion Iron | Jinhua Capital vs. Falcon Energy Materials | Jinhua Capital vs. Algonquin Power Utilities |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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