Correlation Between Dow Jones and Natera
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Natera 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 Natera 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 Natera Inc, you can compare the effects of market volatilities on Dow Jones and Natera 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 Natera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Natera.
Diversification Opportunities for Dow Jones and Natera
Poor diversification
The 3 months correlation between Dow and Natera is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Natera Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natera Inc 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 Natera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natera Inc has no effect on the direction of Dow Jones i.e., Dow Jones and Natera go up and down completely randomly.
Pair Corralation between Dow Jones and Natera
Assuming the 90 days trading horizon Dow Jones is expected to generate 6.07 times less return on investment than Natera. But when comparing it to its historical volatility, Dow Jones Industrial is 3.99 times less risky than Natera. It trades about 0.11 of its potential returns per unit of risk. Natera Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 6,594 in Natera Inc on August 28, 2024 and sell it today you would earn a total of 9,845 from holding Natera Inc or generate 149.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Natera Inc
Performance |
| Timeline |
Dow Jones and Natera Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Natera Inc
Pair trading matchups for Natera
Pair Trading with Dow Jones and Natera
The main advantage of trading using opposite Dow Jones and Natera positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Natera 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 Natera will offset losses from the drop in Natera'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 |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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