Correlation Between Dow Jones and Kraft Bank
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Kraft Bank 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 Kraft Bank 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 Kraft Bank Asa, you can compare the effects of market volatilities on Dow Jones and Kraft Bank 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 Kraft Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Kraft Bank.
Diversification Opportunities for Dow Jones and Kraft Bank
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dow and Kraft is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Kraft Bank Asa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kraft Bank Asa 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 Kraft Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kraft Bank Asa has no effect on the direction of Dow Jones i.e., Dow Jones and Kraft Bank go up and down completely randomly.
Pair Corralation between Dow Jones and Kraft Bank
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.42 times more return on investment than Kraft Bank. However, Dow Jones Industrial is 2.39 times less risky than Kraft Bank. It trades about 0.27 of its potential returns per unit of risk. Kraft Bank Asa is currently generating about -0.17 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Kraft Bank Asa
Performance |
| Timeline |
Dow Jones and Kraft Bank Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Kraft Bank Asa
Pair trading matchups for Kraft Bank
Pair Trading with Dow Jones and Kraft Bank
The main advantage of trading using opposite Dow Jones and Kraft Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Kraft Bank 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 Kraft Bank will offset losses from the drop in Kraft Bank's long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| Kraft Bank vs. Eidesvik Offshore ASA | Kraft Bank vs. Romerike Sparebank | Kraft Bank vs. Melhus Sparebank | Kraft Bank vs. Sea1 Offshore |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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