Correlation Between Dow Jones and Maple Leaf
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Maple Leaf 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 Maple Leaf 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 Maple Leaf Green, you can compare the effects of market volatilities on Dow Jones and Maple Leaf 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 Maple Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Maple Leaf.
Diversification Opportunities for Dow Jones and Maple Leaf
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Maple is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Maple Leaf Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Green 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 Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Green has no effect on the direction of Dow Jones i.e., Dow Jones and Maple Leaf go up and down completely randomly.
Pair Corralation between Dow Jones and Maple Leaf
Assuming the 90 days trading horizon Dow Jones is expected to generate 23.53 times less return on investment than Maple Leaf. But when comparing it to its historical volatility, Dow Jones Industrial is 25.41 times less risky than Maple Leaf. It trades about 0.08 of its potential returns per unit of risk. Maple Leaf Green is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4.20 in Maple Leaf Green on August 29, 2024 and sell it today you would lose (0.81) from holding Maple Leaf Green or give up 19.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Maple Leaf Green
Performance |
| Timeline |
Dow Jones and Maple Leaf Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Maple Leaf Green
Pair trading matchups for Maple Leaf
Pair Trading with Dow Jones and Maple Leaf
The main advantage of trading using opposite Dow Jones and Maple Leaf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Maple Leaf 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 Maple Leaf will offset losses from the drop in Maple Leaf's long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| Maple Leaf vs. Rezolute | Maple Leaf vs. Tempest Therapeutics | Maple Leaf vs. Forte Biosciences | Maple Leaf vs. Dyadic International |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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