Correlation Between Dow Jones and CIMB SP
Can any of the company-specific risk be diversified away by investing in both Dow Jones and CIMB SP 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 CIMB SP 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 CIMB SP Ethical, you can compare the effects of market volatilities on Dow Jones and CIMB SP 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 CIMB SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and CIMB SP.
Diversification Opportunities for Dow Jones and CIMB SP
Weak diversification
The 3 months correlation between Dow and CIMB is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and CIMB SP Ethical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIMB SP Ethical 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 CIMB SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIMB SP Ethical has no effect on the direction of Dow Jones i.e., Dow Jones and CIMB SP go up and down completely randomly.
Pair Corralation between Dow Jones and CIMB SP
Assuming the 90 days trading horizon Dow Jones is expected to generate 5.12 times less return on investment than CIMB SP. But when comparing it to its historical volatility, Dow Jones Industrial is 1.44 times less risky than CIMB SP. It trades about 0.1 of its potential returns per unit of risk. CIMB SP Ethical is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 3,459 in CIMB SP Ethical on October 23, 2024 and sell it today you would earn a total of 211.00 from holding CIMB SP Ethical or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 84.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. CIMB SP Ethical
Performance |
| Timeline |
Dow Jones and CIMB SP Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
CIMB SP Ethical
Pair trading matchups for CIMB SP
Pair Trading with Dow Jones and CIMB SP
The main advantage of trading using opposite Dow Jones and CIMB SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, CIMB SP 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 CIMB SP will offset losses from the drop in CIMB SP's long position.| Dow Jones vs. Grupo Televisa SAB | Dow Jones vs. NiSource | Dow Jones vs. Kinetik Holdings | Dow Jones vs. Empresa Distribuidora y |
| CIMB SP vs. iShares Govt Bond | CIMB SP vs. Amundi MSCI Europe | CIMB SP vs. iShares Global AAA AA | CIMB SP vs. iShares Smart City |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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