Correlation Between Dow Jones and Optima Health
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Optima 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 Optima 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 Optima Health plc, you can compare the effects of market volatilities on Dow Jones and Optima 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 Optima Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Optima Health.
Diversification Opportunities for Dow Jones and Optima Health
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dow and Optima is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Optima Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optima 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 Optima Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optima Health plc has no effect on the direction of Dow Jones i.e., Dow Jones and Optima Health go up and down completely randomly.
Pair Corralation between Dow Jones and Optima Health
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.65 times more return on investment than Optima Health. However, Dow Jones Industrial is 1.53 times less risky than Optima Health. It trades about 0.15 of its potential returns per unit of risk. Optima Health plc is currently generating about -0.01 per unit of risk. If you would invest 3,870,327 in Dow Jones Industrial on November 3, 2024 and sell it today you would earn a total of 584,139 from holding Dow Jones Industrial or generate 15.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 71.2% |
| Values | Daily Returns |
Dow Jones Industrial vs. Optima Health plc
Performance |
| Timeline |
Dow Jones and Optima Health Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Optima Health plc
Pair trading matchups for Optima Health
Pair Trading with Dow Jones and Optima Health
The main advantage of trading using opposite Dow Jones and Optima Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Optima 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 Optima Health will offset losses from the drop in Optima Health's long position.| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
| Optima Health vs. AMG Advanced Metallurgical | Optima Health vs. Wheaton Precious Metals | Optima Health vs. Liontrust Asset Management | Optima Health vs. Darden Restaurants |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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