Correlation Between Dow Jones and N2ET34
Can any of the company-specific risk be diversified away by investing in both Dow Jones and N2ET34 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 N2ET34 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 N2ET34, you can compare the effects of market volatilities on Dow Jones and N2ET34 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 N2ET34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and N2ET34.
Diversification Opportunities for Dow Jones and N2ET34
Poor diversification
The 3 months correlation between Dow and N2ET34 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and N2ET34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N2ET34 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 N2ET34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N2ET34 has no effect on the direction of Dow Jones i.e., Dow Jones and N2ET34 go up and down completely randomly.
Pair Corralation between Dow Jones and N2ET34
Assuming the 90 days trading horizon Dow Jones is expected to generate 5.62 times less return on investment than N2ET34. But when comparing it to its historical volatility, Dow Jones Industrial is 5.18 times less risky than N2ET34. It trades about 0.07 of its potential returns per unit of risk. N2ET34 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,313 in N2ET34 on September 20, 2024 and sell it today you would earn a total of 2,627 from holding N2ET34 or generate 200.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Dow Jones Industrial vs. N2ET34
Performance |
| Timeline |
Dow Jones and N2ET34 Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
N2ET34
Pair trading matchups for N2ET34
Pair Trading with Dow Jones and N2ET34
The main advantage of trading using opposite Dow Jones and N2ET34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, N2ET34 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 N2ET34 will offset losses from the drop in N2ET34's long position.| Dow Jones vs. Digi International | Dow Jones vs. Grupo Televisa SAB | Dow Jones vs. United Microelectronics | Dow Jones vs. Weibo Corp |
| N2ET34 vs. Taiwan Semiconductor Manufacturing | N2ET34 vs. Apple Inc | N2ET34 vs. Alibaba Group Holding | N2ET34 vs. Microsoft |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format |