Correlation Between Dow Jones and RMB Holdings
Can any of the company-specific risk be diversified away by investing in both Dow Jones and RMB Holdings 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 RMB Holdings 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 RMB Holdings, you can compare the effects of market volatilities on Dow Jones and RMB Holdings 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 RMB Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and RMB Holdings.
Diversification Opportunities for Dow Jones and RMB Holdings
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and RMB is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and RMB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMB Holdings 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 RMB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMB Holdings has no effect on the direction of Dow Jones i.e., Dow Jones and RMB Holdings go up and down completely randomly.
Pair Corralation between Dow Jones and RMB Holdings
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.5 times more return on investment than RMB Holdings. However, Dow Jones Industrial is 1.98 times less risky than RMB Holdings. It trades about 0.34 of its potential returns per unit of risk. RMB Holdings is currently generating about 0.07 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 | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. RMB Holdings
Performance |
| Timeline |
Dow Jones and RMB Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
RMB Holdings
Pair trading matchups for RMB Holdings
Pair Trading with Dow Jones and RMB Holdings
The main advantage of trading using opposite Dow Jones and RMB Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, RMB Holdings 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 RMB Holdings will offset losses from the drop in RMB Holdings' 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 |
| RMB Holdings vs. African Media Entertainment | RMB Holdings vs. ABSA Bank Limited | RMB Holdings vs. eMedia Holdings Limited | RMB Holdings vs. HomeChoice Investments |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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