Correlation Between Dow Jones and Science Applications
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Science Applications 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 Science Applications 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 Science Applications International, you can compare the effects of market volatilities on Dow Jones and Science Applications 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 Science Applications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Science Applications.
Diversification Opportunities for Dow Jones and Science Applications
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Science is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications 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 Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of Dow Jones i.e., Dow Jones and Science Applications go up and down completely randomly.
Pair Corralation between Dow Jones and Science Applications
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.27 times more return on investment than Science Applications. However, Dow Jones Industrial is 3.67 times less risky than Science Applications. It trades about 0.15 of its potential returns per unit of risk. Science Applications International is currently generating about -0.16 per unit of risk. If you would invest 4,251,495 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 135,540 from holding Dow Jones Industrial or generate 3.19% 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. Science Applications Internati
Performance |
| Timeline |
Dow Jones and Science Applications Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Science Applications International
Pair trading matchups for Science Applications
Pair Trading with Dow Jones and Science Applications
The main advantage of trading using opposite Dow Jones and Science Applications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Science Applications 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 Science Applications will offset losses from the drop in Science Applications' long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Science Applications vs. CACI International | Science Applications vs. CDW Corp | Science Applications vs. Gartner | Science Applications vs. Jack Henry Associates |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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