Correlation Between Dow Jones and Sterling Metals
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Sterling Metals 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 Sterling Metals 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 Sterling Metals Corp, you can compare the effects of market volatilities on Dow Jones and Sterling Metals 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 Sterling Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Sterling Metals.
Diversification Opportunities for Dow Jones and Sterling Metals
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Sterling is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Sterling Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Metals Corp 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 Sterling Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Metals Corp has no effect on the direction of Dow Jones i.e., Dow Jones and Sterling Metals go up and down completely randomly.
Pair Corralation between Dow Jones and Sterling Metals
Assuming the 90 days trading horizon Dow Jones is expected to generate 6.27 times less return on investment than Sterling Metals. But when comparing it to its historical volatility, Dow Jones Industrial is 19.81 times less risky than Sterling Metals. It trades about 0.12 of its potential returns per unit of risk. Sterling Metals Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 8.09 in Sterling Metals Corp on August 31, 2024 and sell it today you would lose (5.67) from holding Sterling Metals Corp or give up 70.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Dow Jones Industrial vs. Sterling Metals Corp
Performance |
| Timeline |
Dow Jones and Sterling Metals Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Sterling Metals Corp
Pair trading matchups for Sterling Metals
Pair Trading with Dow Jones and Sterling Metals
The main advantage of trading using opposite Dow Jones and Sterling Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Sterling Metals 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 Sterling Metals will offset losses from the drop in Sterling Metals' long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| Sterling Metals vs. Progressive Planet Solutions | Sterling Metals vs. Durango Resources | Sterling Metals vs. Avarone Metals | Sterling Metals vs. Mundoro Capital |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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