Correlation Between Dow Jones and PAX Global
Can any of the company-specific risk be diversified away by investing in both Dow Jones and PAX Global 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 PAX Global 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 PAX Global Technology, you can compare the effects of market volatilities on Dow Jones and PAX Global 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 PAX Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and PAX Global.
Diversification Opportunities for Dow Jones and PAX Global
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and PAX is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and PAX Global Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAX Global Technology 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 PAX Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAX Global Technology has no effect on the direction of Dow Jones i.e., Dow Jones and PAX Global go up and down completely randomly.
Pair Corralation between Dow Jones and PAX Global
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.55 times more return on investment than PAX Global. However, Dow Jones Industrial is 1.81 times less risky than PAX Global. It trades about 0.34 of its potential returns per unit of risk. PAX Global Technology is currently generating about -0.2 per unit of risk. If you would invest 4,205,219 in Dow Jones Industrial on September 2, 2024 and sell it today you would earn a total of 285,846 from holding Dow Jones Industrial or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. PAX Global Technology
Performance |
| Timeline |
Dow Jones and PAX Global Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
PAX Global Technology
Pair trading matchups for PAX Global
Pair Trading with Dow Jones and PAX Global
The main advantage of trading using opposite Dow Jones and PAX Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, PAX Global 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 PAX Global will offset losses from the drop in PAX Global's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| PAX Global vs. Ricoh Company | PAX Global vs. FactSet Research Systems | PAX Global vs. Palantir Technologies Class | PAX Global vs. Barnes Group |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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