Correlation Between Dow Jones and Penns Woods
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Penns Woods 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 Penns Woods 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 Penns Woods Bancorp, you can compare the effects of market volatilities on Dow Jones and Penns Woods 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 Penns Woods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Penns Woods.
Diversification Opportunities for Dow Jones and Penns Woods
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Penns is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Penns Woods Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penns Woods Bancorp 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 Penns Woods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penns Woods Bancorp has no effect on the direction of Dow Jones i.e., Dow Jones and Penns Woods go up and down completely randomly.
Pair Corralation between Dow Jones and Penns Woods
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.49 times less return on investment than Penns Woods. But when comparing it to its historical volatility, Dow Jones Industrial is 2.51 times less risky than Penns Woods. It trades about 0.26 of its potential returns per unit of risk. Penns Woods Bancorp is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 2,594 in Penns Woods Bancorp on August 29, 2024 and sell it today you would earn a total of 557.00 from holding Penns Woods Bancorp or generate 21.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Penns Woods Bancorp
Performance |
| Timeline |
Dow Jones and Penns Woods Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Penns Woods Bancorp
Pair trading matchups for Penns Woods
Pair Trading with Dow Jones and Penns Woods
The main advantage of trading using opposite Dow Jones and Penns Woods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Penns Woods 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 Penns Woods will offset losses from the drop in Penns Woods' long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Penns Woods vs. 1st Source | Penns Woods vs. Great Southern Bancorp | Penns Woods vs. Waterstone Financial | Penns Woods vs. First Community |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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