Correlation Between Dow Jones and Pace International
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Pace International 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 Pace International 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 Pace International Fixed, you can compare the effects of market volatilities on Dow Jones and Pace International 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 Pace International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Pace International.
Diversification Opportunities for Dow Jones and Pace International
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Pace is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Pace International Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace International Fixed 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 Pace International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace International Fixed has no effect on the direction of Dow Jones i.e., Dow Jones and Pace International go up and down completely randomly.
Pair Corralation between Dow Jones and Pace International
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Pace International. In addition to that, Dow Jones is 1.71 times more volatile than Pace International Fixed. It trades about -0.27 of its total potential returns per unit of risk. Pace International Fixed is currently generating about 0.21 per unit of volatility. If you would invest 777.00 in Pace International Fixed on November 29, 2024 and sell it today you would earn a total of 12.00 from holding Pace International Fixed or generate 1.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Pace International Fixed
Performance |
| Timeline |
Dow Jones and Pace International Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pace International Fixed
Pair trading matchups for Pace International
Pair Trading with Dow Jones and Pace International
The main advantage of trading using opposite Dow Jones and Pace International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Pace International 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 Pace International will offset losses from the drop in Pace International's long position.| Dow Jones vs. Starbucks | Dow Jones vs. Westinghouse Air Brake | Dow Jones vs. Finnair Oyj | Dow Jones vs. Mesa Air Group |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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