Correlation Between Dow Jones and MEI Pharma
Can any of the company-specific risk be diversified away by investing in both Dow Jones and MEI Pharma 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 MEI Pharma 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 MEI Pharma, you can compare the effects of market volatilities on Dow Jones and MEI Pharma 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 MEI Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and MEI Pharma.
Diversification Opportunities for Dow Jones and MEI Pharma
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and MEI is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and MEI Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEI Pharma 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 MEI Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEI Pharma has no effect on the direction of Dow Jones i.e., Dow Jones and MEI Pharma go up and down completely randomly.
Pair Corralation between Dow Jones and MEI Pharma
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.1 times less return on investment than MEI Pharma. But when comparing it to its historical volatility, Dow Jones Industrial is 3.36 times less risky than MEI Pharma. It trades about 0.15 of its potential returns per unit of risk. MEI Pharma is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 274.00 in MEI Pharma on August 24, 2024 and sell it today you would earn a total of 7.00 from holding MEI Pharma or generate 2.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. MEI Pharma
Performance |
| Timeline |
Dow Jones and MEI Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
MEI Pharma
Pair trading matchups for MEI Pharma
Pair Trading with Dow Jones and MEI Pharma
The main advantage of trading using opposite Dow Jones and MEI Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, MEI Pharma 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 MEI Pharma will offset losses from the drop in MEI Pharma's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| MEI Pharma vs. Kezar Life Sciences | MEI Pharma vs. Vincerx Pharma | MEI Pharma vs. Avenue Therapeutics | MEI Pharma vs. Assembly Biosciences |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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