Correlation Between Dow Jones and Power Finance
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Power Finance 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 Power Finance 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 Power Finance, you can compare the effects of market volatilities on Dow Jones and Power Finance 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 Power Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Power Finance.
Diversification Opportunities for Dow Jones and Power Finance
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Power is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Power Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Finance 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 Power Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Finance has no effect on the direction of Dow Jones i.e., Dow Jones and Power Finance go up and down completely randomly.
Pair Corralation between Dow Jones and Power Finance
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.72 times less return on investment than Power Finance. But when comparing it to its historical volatility, Dow Jones Industrial is 3.12 times less risky than Power Finance. It trades about 0.26 of its potential returns per unit of risk. Power Finance is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 44,735 in Power Finance on August 28, 2024 and sell it today you would earn a total of 3,415 from holding Power Finance or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 86.36% |
| Values | Daily Returns |
Dow Jones Industrial vs. Power Finance
Performance |
| Timeline |
Dow Jones and Power Finance Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Power Finance
Pair trading matchups for Power Finance
Pair Trading with Dow Jones and Power Finance
The main advantage of trading using opposite Dow Jones and Power Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Power Finance 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 Power Finance will offset losses from the drop in Power Finance'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 |
| Power Finance vs. Shemaroo Entertainment Limited | Power Finance vs. Hindustan Media Ventures | Power Finance vs. JGCHEMICALS LIMITED | Power Finance vs. Thirumalai Chemicals Limited |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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