Correlation Between Dow Jones and Lonza Group
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Lonza Group 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 Lonza Group 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 Lonza Group AG, you can compare the effects of market volatilities on Dow Jones and Lonza Group 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 Lonza Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Lonza Group.
Diversification Opportunities for Dow Jones and Lonza Group
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Lonza is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Lonza Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonza Group AG 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 Lonza Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonza Group AG has no effect on the direction of Dow Jones i.e., Dow Jones and Lonza Group go up and down completely randomly.
Pair Corralation between Dow Jones and Lonza Group
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.09 times less return on investment than Lonza Group. But when comparing it to its historical volatility, Dow Jones Industrial is 2.98 times less risky than Lonza Group. It trades about 0.08 of its potential returns per unit of risk. Lonza Group AG is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,881 in Lonza Group AG on September 1, 2024 and sell it today you would earn a total of 1,082 from holding Lonza Group AG or generate 22.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Lonza Group AG
Performance |
| Timeline |
Dow Jones and Lonza Group Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Lonza Group AG
Pair trading matchups for Lonza Group
Pair Trading with Dow Jones and Lonza Group
The main advantage of trading using opposite Dow Jones and Lonza Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Lonza Group 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 Lonza Group will offset losses from the drop in Lonza Group's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Lonza Group vs. Revvity | Lonza Group vs. Sonic Healthcare Limited | Lonza Group vs. Personalis | Lonza Group vs. Applied DNA Sciences |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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