Correlation Between Dow Jones and Lifezone Metals
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Lifezone Metals 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 Lifezone Metals 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 Lifezone Metals Limited, you can compare the effects of market volatilities on Dow Jones and Lifezone Metals 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 Lifezone Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Lifezone Metals.
Diversification Opportunities for Dow Jones and Lifezone Metals
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Lifezone is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Lifezone Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifezone Metals 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 Lifezone Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifezone Metals has no effect on the direction of Dow Jones i.e., Dow Jones and Lifezone Metals go up and down completely randomly.
Pair Corralation between Dow Jones and Lifezone Metals
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.79 times less return on investment than Lifezone Metals. But when comparing it to its historical volatility, Dow Jones Industrial is 3.09 times less risky than Lifezone Metals. It trades about 0.27 of its potential returns per unit of risk. Lifezone Metals Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 632.00 in Lifezone Metals Limited on August 30, 2024 and sell it today you would earn a total of 63.00 from holding Lifezone Metals Limited or generate 9.97% 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. Lifezone Metals Limited
Performance |
| Timeline |
Dow Jones and Lifezone Metals Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Lifezone Metals Limited
Pair trading matchups for Lifezone Metals
Pair Trading with Dow Jones and Lifezone Metals
The main advantage of trading using opposite Dow Jones and Lifezone Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Lifezone Metals 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 Lifezone Metals will offset losses from the drop in Lifezone Metals' long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| Lifezone Metals vs. Suntory Beverage Food | Lifezone Metals vs. Aspen Insurance Holdings | Lifezone Metals vs. Primerica | Lifezone Metals vs. Ambev SA ADR |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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