Correlation Between Dow Jones and Brinks
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Brinks 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 Brinks 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 The Brinks, you can compare the effects of market volatilities on Dow Jones and Brinks 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 Brinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Brinks.
Diversification Opportunities for Dow Jones and Brinks
Excellent diversification
The 3 months correlation between Dow and Brinks is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and The Brinks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinks 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 Brinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinks has no effect on the direction of Dow Jones i.e., Dow Jones and Brinks go up and down completely randomly.
Pair Corralation between Dow Jones and Brinks
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Brinks. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 1.99 times less risky than Brinks. The index trades about -0.28 of its potential returns per unit of risk. The The Brinks is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 9,000 in The Brinks on September 29, 2024 and sell it today you would lose (250.00) from holding The Brinks or give up 2.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Dow Jones Industrial vs. The Brinks
Performance |
| Timeline |
Dow Jones and Brinks Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
The Brinks
Pair trading matchups for Brinks
Pair Trading with Dow Jones and Brinks
The main advantage of trading using opposite Dow Jones and Brinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Brinks 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 Brinks will offset losses from the drop in Brinks' long position.| Dow Jones vs. Eldorado Gold Corp | Dow Jones vs. Flexible Solutions International | Dow Jones vs. Olympic Steel | Dow Jones vs. Valhi Inc |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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