Correlation Between Dow Jones and Renasant
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Renasant 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 Renasant 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 Renasant, you can compare the effects of market volatilities on Dow Jones and Renasant 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 Renasant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Renasant.
Diversification Opportunities for Dow Jones and Renasant
Poor diversification
The 3 months correlation between Dow and Renasant is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Renasant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renasant 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 Renasant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renasant has no effect on the direction of Dow Jones i.e., Dow Jones and Renasant go up and down completely randomly.
Pair Corralation between Dow Jones and Renasant
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.14 times less return on investment than Renasant. But when comparing it to its historical volatility, Dow Jones Industrial is 3.14 times less risky than Renasant. It trades about 0.22 of its potential returns per unit of risk. Renasant is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,474 in Renasant on August 27, 2024 and sell it today you would earn a total of 316.00 from holding Renasant or generate 9.1% 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. Renasant
Performance |
| Timeline |
Dow Jones and Renasant Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Renasant
Pair trading matchups for Renasant
Pair Trading with Dow Jones and Renasant
The main advantage of trading using opposite Dow Jones and Renasant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Renasant 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 Renasant will offset losses from the drop in Renasant's long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| Renasant vs. Simmons First National | Renasant vs. Trustmark | Renasant vs. Sandy Spring Bancorp | Renasant vs. Stock Yards Bancorp |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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