Correlation Between Dow Jones and New Age
Can any of the company-specific risk be diversified away by investing in both Dow Jones and New Age 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 New Age 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 New Age Metals, you can compare the effects of market volatilities on Dow Jones and New Age 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 New Age. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and New Age.
Diversification Opportunities for Dow Jones and New Age
Weak diversification
The 3 months correlation between Dow and New is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and New Age Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Age Metals 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 New Age. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Age Metals has no effect on the direction of Dow Jones i.e., Dow Jones and New Age go up and down completely randomly.
Pair Corralation between Dow Jones and New Age
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.09 times more return on investment than New Age. However, Dow Jones Industrial is 11.57 times less risky than New Age. It trades about 0.15 of its potential returns per unit of risk. New Age Metals is currently generating about -0.03 per unit of risk. If you would invest 3,868,632 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 603,574 from holding Dow Jones Industrial or generate 15.6% 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. New Age Metals
Performance |
| Timeline |
Dow Jones and New Age Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
New Age Metals
Pair trading matchups for New Age
Pair Trading with Dow Jones and New Age
The main advantage of trading using opposite Dow Jones and New Age positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, New Age 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 New Age will offset losses from the drop in New Age's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| New Age vs. Stillwater Critical Minerals | New Age vs. Grid Metals Corp | New Age vs. Kore Mining | New Age vs. Imagine Lithium |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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