Correlation Between Dow Jones and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Nippon Steel 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 Nippon Steel 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 Nippon Steel, you can compare the effects of market volatilities on Dow Jones and Nippon Steel 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 Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Nippon Steel.
Diversification Opportunities for Dow Jones and Nippon Steel
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Nippon is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel 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 Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel has no effect on the direction of Dow Jones i.e., Dow Jones and Nippon Steel go up and down completely randomly.
Pair Corralation between Dow Jones and Nippon Steel
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.4 times more return on investment than Nippon Steel. However, Dow Jones Industrial is 2.52 times less risky than Nippon Steel. It trades about 0.11 of its potential returns per unit of risk. Nippon Steel is currently generating about -0.03 per unit of risk. If you would invest 3,815,030 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 658,627 from holding Dow Jones Industrial or generate 17.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.58% |
| Values | Daily Returns |
Dow Jones Industrial vs. Nippon Steel
Performance |
| Timeline |
Dow Jones and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Nippon Steel
Pair trading matchups for Nippon Steel
Pair Trading with Dow Jones and Nippon Steel
The main advantage of trading using opposite Dow Jones and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Nippon Steel 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 Nippon Steel will offset losses from the drop in Nippon Steel's long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| Nippon Steel vs. GREENX METALS LTD | Nippon Steel vs. ADRIATIC METALS LS 013355 | Nippon Steel vs. Amkor Technology | Nippon Steel vs. Vishay Intertechnology |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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