Correlation Between Dow Jones and LianBio ADR
Can any of the company-specific risk be diversified away by investing in both Dow Jones and LianBio ADR 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 LianBio ADR 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 LianBio ADR, you can compare the effects of market volatilities on Dow Jones and LianBio ADR 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 LianBio ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and LianBio ADR.
Diversification Opportunities for Dow Jones and LianBio ADR
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and LianBio is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and LianBio ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LianBio 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 LianBio ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LianBio ADR has no effect on the direction of Dow Jones i.e., Dow Jones and LianBio ADR go up and down completely randomly.
Pair Corralation between Dow Jones and LianBio ADR
Assuming the 90 days trading horizon Dow Jones is expected to generate 6.9 times less return on investment than LianBio ADR. But when comparing it to its historical volatility, Dow Jones Industrial is 6.95 times less risky than LianBio ADR. It trades about 0.08 of its potential returns per unit of risk. LianBio ADR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 137.00 in LianBio ADR on August 28, 2024 and sell it today you would earn a total of 81.00 from holding LianBio ADR or generate 59.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 31.72% |
| Values | Daily Returns |
Dow Jones Industrial vs. LianBio ADR
Performance |
| Timeline |
Dow Jones and LianBio ADR Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
LianBio ADR
Pair trading matchups for LianBio ADR
Pair Trading with Dow Jones and LianBio ADR
The main advantage of trading using opposite Dow Jones and LianBio ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, LianBio ADR 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 LianBio ADR will offset losses from the drop in LianBio ADR's long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| LianBio ADR vs. Sensei Biotherapeutics | LianBio ADR vs. NextCure | LianBio ADR vs. Nuvation Bio | LianBio ADR vs. Inozyme Pharma |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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