Correlation Between Dow Jones and Silkbank
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Silkbank 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 Silkbank 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 Silkbank, you can compare the effects of market volatilities on Dow Jones and Silkbank 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 Silkbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Silkbank.
Diversification Opportunities for Dow Jones and Silkbank
Good diversification
The 3 months correlation between Dow and Silkbank is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Silkbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silkbank 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 Silkbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silkbank has no effect on the direction of Dow Jones i.e., Dow Jones and Silkbank go up and down completely randomly.
Pair Corralation between Dow Jones and Silkbank
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.42 times more return on investment than Silkbank. However, Dow Jones Industrial is 2.38 times less risky than Silkbank. It trades about 0.29 of its potential returns per unit of risk. Silkbank is currently generating about -0.09 per unit of risk. If you would invest 4,273,213 in Dow Jones Industrial on November 4, 2024 and sell it today you would earn a total of 181,253 from holding Dow Jones Industrial or generate 4.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Dow Jones Industrial vs. Silkbank
Performance |
| Timeline |
Dow Jones and Silkbank Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Silkbank
Pair trading matchups for Silkbank
Pair Trading with Dow Jones and Silkbank
The main advantage of trading using opposite Dow Jones and Silkbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Silkbank 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 Silkbank will offset losses from the drop in Silkbank's long position.The idea behind Dow Jones Industrial and Silkbank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Silkbank vs. Data Agro | Silkbank vs. IBL HealthCare | Silkbank vs. Air Link Communication | Silkbank vs. Ittehad Chemicals |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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