Correlation Between Dow Jones and Pakistan International
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Pakistan 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 Pakistan 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 Pakistan International Bulk, you can compare the effects of market volatilities on Dow Jones and Pakistan 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 Pakistan International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Pakistan International.
Diversification Opportunities for Dow Jones and Pakistan International
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Pakistan is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Pakistan International Bulk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan International 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 Pakistan International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan International has no effect on the direction of Dow Jones i.e., Dow Jones and Pakistan International go up and down completely randomly.
Pair Corralation between Dow Jones and Pakistan International
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Pakistan International. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 7.07 times less risky than Pakistan International. The index trades about -0.27 of its potential returns per unit of risk. The Pakistan International Bulk is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 838.00 in Pakistan International Bulk on October 7, 2024 and sell it today you would earn a total of 59.00 from holding Pakistan International Bulk or generate 7.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Dow Jones Industrial vs. Pakistan International Bulk
Performance |
| Timeline |
Dow Jones and Pakistan International Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pakistan International Bulk
Pair trading matchups for Pakistan International
Pair Trading with Dow Jones and Pakistan International
The main advantage of trading using opposite Dow Jones and Pakistan International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Pakistan 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 Pakistan International will offset losses from the drop in Pakistan International's long position.| Dow Jones vs. NetSol Technologies | Dow Jones vs. Q2 Holdings | Dow Jones vs. Weyco Group | Dow Jones vs. Newell Brands |
| Pakistan International vs. Air Link Communication | Pakistan International vs. EFU General Insurance | Pakistan International vs. Crescent Star Insurance | Pakistan International vs. Century Insurance |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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