Correlation Between Dow Jones and Lindsay
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Lindsay 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 Lindsay 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 Lindsay, you can compare the effects of market volatilities on Dow Jones and Lindsay 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 Lindsay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Lindsay.
Diversification Opportunities for Dow Jones and Lindsay
Poor diversification
The 3 months correlation between Dow and Lindsay is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Lindsay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsay 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 Lindsay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsay has no effect on the direction of Dow Jones i.e., Dow Jones and Lindsay go up and down completely randomly.
Pair Corralation between Dow Jones and Lindsay
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.06 times less return on investment than Lindsay. But when comparing it to its historical volatility, Dow Jones Industrial is 1.79 times less risky than Lindsay. It trades about 0.17 of its potential returns per unit of risk. Lindsay is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 12,309 in Lindsay on October 20, 2024 and sell it today you would earn a total of 995.00 from holding Lindsay or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Dow Jones Industrial vs. Lindsay
Performance |
| Timeline |
Dow Jones and Lindsay Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Lindsay
Pair trading matchups for Lindsay
Pair Trading with Dow Jones and Lindsay
The main advantage of trading using opposite Dow Jones and Lindsay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Lindsay 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 Lindsay will offset losses from the drop in Lindsay's long position.| Dow Jones vs. SkyWest | Dow Jones vs. Air Transport Services | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Emerson Radio |
| Lindsay vs. Columbus McKinnon | Lindsay vs. Astec Industries | Lindsay vs. Shyft Group | Lindsay vs. AGCO Corporation |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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