Correlation Between Dow Jones and Lucara Diamond
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Lucara Diamond 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 Lucara Diamond 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 Lucara Diamond Corp, you can compare the effects of market volatilities on Dow Jones and Lucara Diamond 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 Lucara Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Lucara Diamond.
Diversification Opportunities for Dow Jones and Lucara Diamond
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dow and Lucara is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Lucara Diamond Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucara Diamond Corp 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 Lucara Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucara Diamond Corp has no effect on the direction of Dow Jones i.e., Dow Jones and Lucara Diamond go up and down completely randomly.
Pair Corralation between Dow Jones and Lucara Diamond
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.15 times more return on investment than Lucara Diamond. However, Dow Jones Industrial is 6.73 times less risky than Lucara Diamond. It trades about 0.37 of its potential returns per unit of risk. Lucara Diamond Corp is currently generating about -0.2 per unit of risk. If you would invest 4,252,836 in Dow Jones Industrial on November 8, 2024 and sell it today you would earn a total of 234,492 from holding Dow Jones Industrial or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Lucara Diamond Corp
Performance |
| Timeline |
Dow Jones and Lucara Diamond Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Lucara Diamond Corp
Pair trading matchups for Lucara Diamond
Pair Trading with Dow Jones and Lucara Diamond
The main advantage of trading using opposite Dow Jones and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Lucara Diamond 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 Lucara Diamond will offset losses from the drop in Lucara Diamond's long position.| Dow Jones vs. National Vision Holdings | Dow Jones vs. Grocery Outlet Holding | Dow Jones vs. Asbury Automotive Group | Dow Jones vs. Hanover Foods |
| Lucara Diamond vs. Mountain Province Diamonds | Lucara Diamond vs. Lundin Gold | Lucara Diamond vs. Mandalay Resources Corp | Lucara Diamond vs. North Arrow Minerals |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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