Correlation Between Dow Jones and Searchlight Resources
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Searchlight Resources 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 Searchlight Resources 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 Searchlight Resources, you can compare the effects of market volatilities on Dow Jones and Searchlight Resources 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 Searchlight Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Searchlight Resources.
Diversification Opportunities for Dow Jones and Searchlight Resources
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Searchlight is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Searchlight Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Searchlight Resources 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 Searchlight Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Searchlight Resources has no effect on the direction of Dow Jones i.e., Dow Jones and Searchlight Resources go up and down completely randomly.
Pair Corralation between Dow Jones and Searchlight Resources
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.07 times more return on investment than Searchlight Resources. However, Dow Jones Industrial is 14.18 times less risky than Searchlight Resources. It trades about 0.08 of its potential returns per unit of risk. Searchlight Resources is currently generating about 0.0 per unit of risk. If you would invest 3,378,148 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 1,107,883 from holding Dow Jones Industrial or generate 32.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Searchlight Resources
Performance |
| Timeline |
Dow Jones and Searchlight Resources Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Searchlight Resources
Pair trading matchups for Searchlight Resources
Pair Trading with Dow Jones and Searchlight Resources
The main advantage of trading using opposite Dow Jones and Searchlight Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Searchlight Resources 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 Searchlight Resources will offset losses from the drop in Searchlight Resources' long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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