Correlation Between Dow Jones and NMC Health
Can any of the company-specific risk be diversified away by investing in both Dow Jones and NMC Health 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 NMC Health 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 NMC Health PLC, you can compare the effects of market volatilities on Dow Jones and NMC Health 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 NMC Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and NMC Health.
Diversification Opportunities for Dow Jones and NMC Health
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dow and NMC is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and NMC Health PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMC Health PLC 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 NMC Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMC Health PLC has no effect on the direction of Dow Jones i.e., Dow Jones and NMC Health go up and down completely randomly.
Pair Corralation between Dow Jones and NMC Health
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.03 times more return on investment than NMC Health. However, Dow Jones Industrial is 30.65 times less risky than NMC Health. It trades about 0.09 of its potential returns per unit of risk. NMC Health PLC is currently generating about -0.21 per unit of risk. If you would invest 3,371,471 in Dow Jones Industrial on October 16, 2024 and sell it today you would earn a total of 858,241 from holding Dow Jones Industrial or generate 25.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 5.12% |
| Values | Daily Returns |
Dow Jones Industrial vs. NMC Health PLC
Performance |
| Timeline |
Dow Jones and NMC Health Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
NMC Health PLC
Pair trading matchups for NMC Health
Pair Trading with Dow Jones and NMC Health
The main advantage of trading using opposite Dow Jones and NMC Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, NMC Health 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 NMC Health will offset losses from the drop in NMC Health's long position.| Dow Jones vs. LB Foster | Dow Jones vs. Definitive Healthcare Corp | Dow Jones vs. TFI International | Dow Jones vs. Ryanair Holdings PLC |
| NMC Health vs. Veltex | NMC Health vs. Numinus Wellness | NMC Health vs. IMAC Holdings | NMC Health vs. P3 Health Partners |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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