Correlation Between Dow Jones and DOLFINES
Can any of the company-specific risk be diversified away by investing in both Dow Jones and DOLFINES 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 DOLFINES 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 DOLFINES SA EO, you can compare the effects of market volatilities on Dow Jones and DOLFINES 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 DOLFINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and DOLFINES.
Diversification Opportunities for Dow Jones and DOLFINES
Very weak diversification
The 3 months correlation between Dow and DOLFINES is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and DOLFINES SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOLFINES SA EO 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 DOLFINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOLFINES SA EO has no effect on the direction of Dow Jones i.e., Dow Jones and DOLFINES go up and down completely randomly.
Pair Corralation between Dow Jones and DOLFINES
Assuming the 90 days trading horizon Dow Jones is expected to generate 217.42 times less return on investment than DOLFINES. But when comparing it to its historical volatility, Dow Jones Industrial is 79.65 times less risky than DOLFINES. It trades about 0.07 of its potential returns per unit of risk. DOLFINES SA EO is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 50.00 in DOLFINES SA EO on October 18, 2024 and sell it today you would earn a total of 123.00 from holding DOLFINES SA EO or generate 246.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.36% |
| Values | Daily Returns |
Dow Jones Industrial vs. DOLFINES SA EO
Performance |
| Timeline |
Dow Jones and DOLFINES Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
DOLFINES SA EO
Pair trading matchups for DOLFINES
Pair Trading with Dow Jones and DOLFINES
The main advantage of trading using opposite Dow Jones and DOLFINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, DOLFINES 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 DOLFINES will offset losses from the drop in DOLFINES's long position.| Dow Jones vs. JD Sports Fashion | Dow Jones vs. Titan Machinery | Dow Jones vs. Canlan Ice Sports | Dow Jones vs. Playa Hotels Resorts |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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