Correlation Between Dow Jones and Limoneira
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Limoneira 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 Limoneira 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 Limoneira Co, you can compare the effects of market volatilities on Dow Jones and Limoneira 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 Limoneira. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Limoneira.
Diversification Opportunities for Dow Jones and Limoneira
Poor diversification
The 3 months correlation between Dow and Limoneira is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Limoneira Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limoneira 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 Limoneira. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limoneira has no effect on the direction of Dow Jones i.e., Dow Jones and Limoneira go up and down completely randomly.
Pair Corralation between Dow Jones and Limoneira
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.15 times less return on investment than Limoneira. But when comparing it to its historical volatility, Dow Jones Industrial is 3.01 times less risky than Limoneira. It trades about 0.08 of its potential returns per unit of risk. Limoneira Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,282 in Limoneira Co on August 24, 2024 and sell it today you would earn a total of 1,467 from holding Limoneira Co or generate 114.43% 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. Limoneira Co
Performance |
| Timeline |
Dow Jones and Limoneira Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Limoneira Co
Pair trading matchups for Limoneira
Pair Trading with Dow Jones and Limoneira
The main advantage of trading using opposite Dow Jones and Limoneira positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Limoneira 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 Limoneira will offset losses from the drop in Limoneira's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Limoneira vs. Alico Inc | Limoneira vs. SW Seed Company | Limoneira vs. Adecoagro SA | Limoneira vs. Tyson Foods |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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