Correlation Between Dow Jones and Leef Brands
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Leef Brands 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 Leef Brands 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 Leef Brands, you can compare the effects of market volatilities on Dow Jones and Leef Brands 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 Leef Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Leef Brands.
Diversification Opportunities for Dow Jones and Leef Brands
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Leef is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Leef Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leef Brands 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 Leef Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leef Brands has no effect on the direction of Dow Jones i.e., Dow Jones and Leef Brands go up and down completely randomly.
Pair Corralation between Dow Jones and Leef Brands
Assuming the 90 days trading horizon Dow Jones is expected to generate 10.79 times less return on investment than Leef Brands. But when comparing it to its historical volatility, Dow Jones Industrial is 18.92 times less risky than Leef Brands. It trades about 0.13 of its potential returns per unit of risk. Leef Brands is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Leef Brands on August 25, 2024 and sell it today you would earn a total of 5.00 from holding Leef Brands or generate 45.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Leef Brands
Performance |
| Timeline |
Dow Jones and Leef Brands Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Leef Brands
Pair trading matchups for Leef Brands
Pair Trading with Dow Jones and Leef Brands
The main advantage of trading using opposite Dow Jones and Leef Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Leef Brands 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 Leef Brands will offset losses from the drop in Leef Brands' 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 |
| Leef Brands vs. Hasbro Inc | Leef Brands vs. Emerson Radio | Leef Brands vs. Playtech plc | Leef Brands vs. Cumberland Pharmaceuticals |
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 Managers module to screen money managers from public funds and ETFs managed around the world.
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