Correlation Between Dow Jones and Kits Eyecare
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Kits Eyecare 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 Kits Eyecare 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 Kits Eyecare, you can compare the effects of market volatilities on Dow Jones and Kits Eyecare 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 Kits Eyecare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Kits Eyecare.
Diversification Opportunities for Dow Jones and Kits Eyecare
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Kits is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Kits Eyecare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kits Eyecare 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 Kits Eyecare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kits Eyecare has no effect on the direction of Dow Jones i.e., Dow Jones and Kits Eyecare go up and down completely randomly.
Pair Corralation between Dow Jones and Kits Eyecare
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.59 times less return on investment than Kits Eyecare. But when comparing it to its historical volatility, Dow Jones Industrial is 4.13 times less risky than Kits Eyecare. It trades about 0.13 of its potential returns per unit of risk. Kits Eyecare is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 569.00 in Kits Eyecare on September 2, 2024 and sell it today you would earn a total of 350.00 from holding Kits Eyecare or generate 61.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Kits Eyecare
Performance |
| Timeline |
Dow Jones and Kits Eyecare Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Kits Eyecare
Pair trading matchups for Kits Eyecare
Pair Trading with Dow Jones and Kits Eyecare
The main advantage of trading using opposite Dow Jones and Kits Eyecare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Kits Eyecare 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 Kits Eyecare will offset losses from the drop in Kits Eyecare's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| Kits Eyecare vs. Data Communications Management | Kits Eyecare vs. Haivision Systems | Kits Eyecare vs. Thinkific Labs |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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