Correlation Between Dow Jones and PT Charlie
Can any of the company-specific risk be diversified away by investing in both Dow Jones and PT Charlie 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 PT Charlie 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 PT Charlie Hospital, you can compare the effects of market volatilities on Dow Jones and PT Charlie 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 PT Charlie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and PT Charlie.
Diversification Opportunities for Dow Jones and PT Charlie
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and RSCH is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and PT Charlie Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Charlie Hospital 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 PT Charlie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Charlie Hospital has no effect on the direction of Dow Jones i.e., Dow Jones and PT Charlie go up and down completely randomly.
Pair Corralation between Dow Jones and PT Charlie
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.34 times more return on investment than PT Charlie. However, Dow Jones Industrial is 2.9 times less risky than PT Charlie. It trades about 0.21 of its potential returns per unit of risk. PT Charlie Hospital is currently generating about -0.16 per unit of risk. If you would invest 4,237,436 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 192,215 from holding Dow Jones Industrial or generate 4.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. PT Charlie Hospital
Performance |
| Timeline |
Dow Jones and PT Charlie Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
PT Charlie Hospital
Pair trading matchups for PT Charlie
Pair Trading with Dow Jones and PT Charlie
The main advantage of trading using opposite Dow Jones and PT Charlie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, PT Charlie 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 PT Charlie will offset losses from the drop in PT Charlie's long position.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| PT Charlie vs. Bank Central Asia | PT Charlie vs. Bank Rakyat Indonesia | PT Charlie vs. Bayan Resources Tbk | PT Charlie vs. Bank Mandiri Persero |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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