Correlation Between Dow Jones and Legrand SA
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Legrand SA 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 Legrand SA 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 Legrand SA ADR, you can compare the effects of market volatilities on Dow Jones and Legrand SA 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 Legrand SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Legrand SA.
Diversification Opportunities for Dow Jones and Legrand SA
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Legrand is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Legrand SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand SA ADR 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 Legrand SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legrand SA ADR has no effect on the direction of Dow Jones i.e., Dow Jones and Legrand SA go up and down completely randomly.
Pair Corralation between Dow Jones and Legrand SA
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.19 times less return on investment than Legrand SA. But when comparing it to its historical volatility, Dow Jones Industrial is 1.85 times less risky than Legrand SA. It trades about 0.19 of its potential returns per unit of risk. Legrand SA ADR is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1,968 in Legrand SA ADR on October 26, 2024 and sell it today you would earn a total of 179.00 from holding Legrand SA ADR or generate 9.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Dow Jones Industrial vs. Legrand SA ADR
Performance |
| Timeline |
Dow Jones and Legrand SA Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Legrand SA ADR
Pair trading matchups for Legrand SA
Pair Trading with Dow Jones and Legrand SA
The main advantage of trading using opposite Dow Jones and Legrand SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Legrand SA 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 Legrand SA will offset losses from the drop in Legrand SA's long position.| Dow Jones vs. Asure Software | Dow Jones vs. Amkor Technology | Dow Jones vs. Radcom | Dow Jones vs. Senmiao Technology |
| Legrand SA vs. AFC Energy plc | Legrand SA vs. Loop Energy | Legrand SA vs. Sunrise New Energy | Legrand SA vs. Signify NV |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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