Correlation Between Dow Jones and MT Bank
Can any of the company-specific risk be diversified away by investing in both Dow Jones and MT Bank 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 MT Bank 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 MT Bank Corp, you can compare the effects of market volatilities on Dow Jones and MT Bank 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 MT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and MT Bank.
Diversification Opportunities for Dow Jones and MT Bank
Very poor diversification
The 3 months correlation between Dow and MTZ is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and MT Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT Bank Corp 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 MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank Corp has no effect on the direction of Dow Jones i.e., Dow Jones and MT Bank go up and down completely randomly.
Pair Corralation between Dow Jones and MT Bank
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.88 times less return on investment than MT Bank. But when comparing it to its historical volatility, Dow Jones Industrial is 3.14 times less risky than MT Bank. It trades about 0.37 of its potential returns per unit of risk. MT Bank Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 18,080 in MT Bank Corp on September 1, 2024 and sell it today you would earn a total of 2,750 from holding MT Bank Corp or generate 15.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 91.3% |
| Values | Daily Returns |
Dow Jones Industrial vs. MT Bank Corp
Performance |
| Timeline |
Dow Jones and MT Bank Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
MT Bank Corp
Pair trading matchups for MT Bank
Pair Trading with Dow Jones and MT Bank
The main advantage of trading using opposite Dow Jones and MT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, MT Bank 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 MT Bank will offset losses from the drop in MT Bank's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| MT Bank vs. SERI INDUSTRIAL EO | MT Bank vs. Playtech plc | MT Bank vs. Zijin Mining Group | MT Bank vs. Madison Square Garden |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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