Correlation Between Dow Jones and PPG Industries
Can any of the company-specific risk be diversified away by investing in both Dow Jones and PPG Industries 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 PPG Industries 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 PPG Industries, you can compare the effects of market volatilities on Dow Jones and PPG Industries 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 PPG Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and PPG Industries.
Diversification Opportunities for Dow Jones and PPG Industries
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and PPG is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG Industries 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 PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Dow Jones i.e., Dow Jones and PPG Industries go up and down completely randomly.
Pair Corralation between Dow Jones and PPG Industries
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.79 times more return on investment than PPG Industries. However, Dow Jones Industrial is 1.26 times less risky than PPG Industries. It trades about 0.12 of its potential returns per unit of risk. PPG Industries is currently generating about 0.04 per unit of risk. If you would invest 3,640,493 in Dow Jones Industrial on September 4, 2024 and sell it today you would earn a total of 837,707 from holding Dow Jones Industrial or generate 23.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.59% |
| Values | Daily Returns |
Dow Jones Industrial vs. PPG Industries
Performance |
| Timeline |
Dow Jones and PPG Industries Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
PPG Industries
Pair trading matchups for PPG Industries
Pair Trading with Dow Jones and PPG Industries
The main advantage of trading using opposite Dow Jones and PPG Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, PPG Industries 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 PPG Industries will offset losses from the drop in PPG Industries' long position.| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
| PPG Industries vs. Cognizant Technology Solutions | PPG Industries vs. Samsung Electronics Co | PPG Industries vs. First Republic Bank | PPG Industries vs. New Oriental Education |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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