Correlation Between Dow Jones and Japan Airport
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Japan Airport 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 Japan Airport 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 Japan Airport Terminal, you can compare the effects of market volatilities on Dow Jones and Japan Airport 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 Japan Airport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Japan Airport.
Diversification Opportunities for Dow Jones and Japan Airport
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Japan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Japan Airport Terminal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Airport Terminal 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 Japan Airport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Airport Terminal has no effect on the direction of Dow Jones i.e., Dow Jones and Japan Airport go up and down completely randomly.
Pair Corralation between Dow Jones and Japan Airport
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.32 times more return on investment than Japan Airport. However, Dow Jones Industrial is 3.13 times less risky than Japan Airport. It trades about 0.08 of its potential returns per unit of risk. Japan Airport Terminal is currently generating about 0.0 per unit of risk. If you would invest 3,394,710 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 1,034,941 from holding Dow Jones Industrial or generate 30.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. Japan Airport Terminal
Performance |
| Timeline |
Dow Jones and Japan Airport Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Japan Airport Terminal
Pair trading matchups for Japan Airport
Pair Trading with Dow Jones and Japan Airport
The main advantage of trading using opposite Dow Jones and Japan Airport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Japan Airport 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 Japan Airport will offset losses from the drop in Japan Airport's long position.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| Japan Airport vs. Aeroports de Paris | Japan Airport vs. Aena SME SA | Japan Airport vs. Auckland International Airport | Japan Airport vs. Auckland International Airport |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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