Correlation Between Dow Jones and Matthews Pacific
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Matthews Pacific 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 Matthews Pacific 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 Matthews Pacific Tiger, you can compare the effects of market volatilities on Dow Jones and Matthews Pacific 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 Matthews Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Matthews Pacific.
Diversification Opportunities for Dow Jones and Matthews Pacific
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Matthews is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Matthews Pacific Tiger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Pacific Tiger 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 Matthews Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Pacific Tiger has no effect on the direction of Dow Jones i.e., Dow Jones and Matthews Pacific go up and down completely randomly.
Pair Corralation between Dow Jones and Matthews Pacific
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.66 times more return on investment than Matthews Pacific. However, Dow Jones Industrial is 1.51 times less risky than Matthews Pacific. It trades about 0.16 of its potential returns per unit of risk. Matthews Pacific Tiger is currently generating about 0.02 per unit of risk. If you would invest 3,857,103 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 633,962 from holding Dow Jones Industrial or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. Matthews Pacific Tiger
Performance |
| Timeline |
Dow Jones and Matthews Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Matthews Pacific Tiger
Pair trading matchups for Matthews Pacific
Pair Trading with Dow Jones and Matthews Pacific
The main advantage of trading using opposite Dow Jones and Matthews Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Matthews Pacific 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 Matthews Pacific will offset losses from the drop in Matthews Pacific's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Matthews Pacific vs. Matthews Asia Growth | Matthews Pacific vs. Matthews Japan Fund | Matthews Pacific vs. Matthews China Fund |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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