Correlation Between Dow Jones and NEXG11
Can any of the company-specific risk be diversified away by investing in both Dow Jones and NEXG11 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 NEXG11 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 NEXG11, you can compare the effects of market volatilities on Dow Jones and NEXG11 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 NEXG11. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and NEXG11.
Diversification Opportunities for Dow Jones and NEXG11
Very weak diversification
The 3 months correlation between Dow and NEXG11 is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and NEXG11 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXG11 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 NEXG11. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXG11 has no effect on the direction of Dow Jones i.e., Dow Jones and NEXG11 go up and down completely randomly.
Pair Corralation between Dow Jones and NEXG11
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.26 times less return on investment than NEXG11. In addition to that, Dow Jones is 1.85 times more volatile than NEXG11. It trades about 0.08 of its total potential returns per unit of risk. NEXG11 is currently generating about 0.33 per unit of volatility. If you would invest 9,086 in NEXG11 on September 19, 2024 and sell it today you would earn a total of 3,514 from holding NEXG11 or generate 38.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 54.95% |
| Values | Daily Returns |
Dow Jones Industrial vs. NEXG11
Performance |
| Timeline |
Dow Jones and NEXG11 Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
NEXG11
Pair trading matchups for NEXG11
Pair Trading with Dow Jones and NEXG11
The main advantage of trading using opposite Dow Jones and NEXG11 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, NEXG11 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 NEXG11 will offset losses from the drop in NEXG11's long position.| Dow Jones vs. Mangazeya Mining | Dow Jones vs. Summit Materials | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. AMCON Distributing |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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