Correlation Between Dow Jones and Lumen Technologies
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Lumen 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 Lumen 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 Lumen Technologies, you can compare the effects of market volatilities on Dow Jones and Lumen 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 Lumen Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Lumen Technologies.
Diversification Opportunities for Dow Jones and Lumen Technologies
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Lumen is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen 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 Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of Dow Jones i.e., Dow Jones and Lumen Technologies go up and down completely randomly.
Pair Corralation between Dow Jones and Lumen Technologies
Assuming the 90 days trading horizon Dow Jones is expected to generate 16.63 times less return on investment than Lumen Technologies. But when comparing it to its historical volatility, Dow Jones Industrial is 12.41 times less risky than Lumen Technologies. It trades about 0.1 of its potential returns per unit of risk. Lumen Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 162.00 in Lumen Technologies on August 27, 2024 and sell it today you would earn a total of 626.00 from holding Lumen Technologies or generate 386.42% 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. Lumen Technologies
Performance |
| Timeline |
Dow Jones and Lumen Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Lumen Technologies
Pair trading matchups for Lumen Technologies
Pair Trading with Dow Jones and Lumen Technologies
The main advantage of trading using opposite Dow Jones and Lumen Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Lumen 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 Lumen Technologies will offset losses from the drop in Lumen Technologies' long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| Lumen Technologies vs. Verizon Communications | Lumen Technologies vs. T Mobile | Lumen Technologies vs. Comcast Corp | Lumen Technologies vs. ATT Inc |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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