Correlation Between Dow Jones and LightPath Technologies
Can any of the company-specific risk be diversified away by investing in both Dow Jones and LightPath Technologies 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 LightPath Technologies 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 LightPath Technologies, you can compare the effects of market volatilities on Dow Jones and LightPath Technologies 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 LightPath Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and LightPath Technologies.
Diversification Opportunities for Dow Jones and LightPath Technologies
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and LightPath is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and LightPath Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LightPath Technologies 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 LightPath Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LightPath Technologies has no effect on the direction of Dow Jones i.e., Dow Jones and LightPath Technologies go up and down completely randomly.
Pair Corralation between Dow Jones and LightPath Technologies
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.78 times less return on investment than LightPath Technologies. But when comparing it to its historical volatility, Dow Jones Industrial is 8.66 times less risky than LightPath Technologies. It trades about 0.17 of its potential returns per unit of risk. LightPath Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 310.00 in LightPath Technologies on October 26, 2024 and sell it today you would earn a total of 16.50 from holding LightPath Technologies or generate 5.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. LightPath Technologies
Performance |
| Timeline |
Dow Jones and LightPath Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
LightPath Technologies
Pair trading matchups for LightPath Technologies
Pair Trading with Dow Jones and LightPath Technologies
The main advantage of trading using opposite Dow Jones and LightPath Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, LightPath Technologies 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 LightPath Technologies will offset losses from the drop in LightPath Technologies' long position.| Dow Jones vs. Asure Software | Dow Jones vs. Amkor Technology | Dow Jones vs. Radcom | Dow Jones vs. Senmiao Technology |
| LightPath Technologies vs. Methode Electronics | LightPath Technologies vs. OSI Systems | LightPath Technologies vs. Plexus Corp | LightPath Technologies vs. CTS 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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