Correlation Between Dow Jones and Power Financial
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Power Financial 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 Financial 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 Financial Corp, you can compare the effects of market volatilities on Dow Jones and Power Financial 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 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Power Financial.
Diversification Opportunities for Dow Jones and Power Financial
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Power is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Power Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Financial Corp 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Financial Corp has no effect on the direction of Dow Jones i.e., Dow Jones and Power Financial go up and down completely randomly.
Pair Corralation between Dow Jones and Power Financial
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Power Financial. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 3.12 times less risky than Power Financial. The index trades about -0.01 of its potential returns per unit of risk. The Power Financial Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,620 in Power Financial Corp on September 14, 2024 and sell it today you would earn a total of 48.00 from holding Power Financial Corp or generate 2.96% 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. Power Financial Corp
Performance |
| Timeline |
Dow Jones and Power Financial Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Power Financial Corp
Pair trading matchups for Power Financial
Pair Trading with Dow Jones and Power Financial
The main advantage of trading using opposite Dow Jones and Power Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Power Financial 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 Financial will offset losses from the drop in Power Financial's long position.| Dow Jones vs. Hurco Companies | Dow Jones vs. Tyson Foods | Dow Jones vs. MYR Group | Dow Jones vs. Cannae Holdings |
| Power Financial vs. Reliq Health Technologies | Power Financial vs. Mako Mining Corp | Power Financial vs. NeuPath Health | Power Financial vs. Forsys Metals Corp |
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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