Correlation Between Dow Jones and Renta 4
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Renta 4 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 Renta 4 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 Renta 4 Banco, you can compare the effects of market volatilities on Dow Jones and Renta 4 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 Renta 4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Renta 4.
Diversification Opportunities for Dow Jones and Renta 4
Poor diversification
The 3 months correlation between Dow and Renta is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Renta 4 Banco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renta 4 Banco 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 Renta 4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renta 4 Banco has no effect on the direction of Dow Jones i.e., Dow Jones and Renta 4 go up and down completely randomly.
Pair Corralation between Dow Jones and Renta 4
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.72 times less return on investment than Renta 4. But when comparing it to its historical volatility, Dow Jones Industrial is 2.03 times less risky than Renta 4. It trades about 0.27 of its potential returns per unit of risk. Renta 4 Banco is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,172 in Renta 4 Banco on August 30, 2024 and sell it today you would earn a total of 118.00 from holding Renta 4 Banco or generate 10.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Renta 4 Banco
Performance |
| Timeline |
Dow Jones and Renta 4 Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Renta 4 Banco
Pair trading matchups for Renta 4
Pair Trading with Dow Jones and Renta 4
The main advantage of trading using opposite Dow Jones and Renta 4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Renta 4 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 Renta 4 will offset losses from the drop in Renta 4's long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| Renta 4 vs. Grupo Catalana Occidente | Renta 4 vs. Miquel y Costas | Renta 4 vs. Faes Farma SA | Renta 4 vs. Azkoyen |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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