Correlation Between Dow Jones and Sitka Gold
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Sitka Gold 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 Sitka Gold 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 Sitka Gold Corp, you can compare the effects of market volatilities on Dow Jones and Sitka Gold 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 Sitka Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Sitka Gold.
Diversification Opportunities for Dow Jones and Sitka Gold
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Sitka is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Sitka Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitka Gold 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 Sitka Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitka Gold Corp has no effect on the direction of Dow Jones i.e., Dow Jones and Sitka Gold go up and down completely randomly.
Pair Corralation between Dow Jones and Sitka Gold
Assuming the 90 days trading horizon Dow Jones is expected to generate 4.5 times less return on investment than Sitka Gold. But when comparing it to its historical volatility, Dow Jones Industrial is 9.64 times less risky than Sitka Gold. It trades about 0.14 of its potential returns per unit of risk. Sitka Gold Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 13.00 in Sitka Gold Corp on August 25, 2024 and sell it today you would earn a total of 12.00 from holding Sitka Gold Corp or generate 92.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.66% |
| Values | Daily Returns |
Dow Jones Industrial vs. Sitka Gold Corp
Performance |
| Timeline |
Dow Jones and Sitka Gold Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Sitka Gold Corp
Pair trading matchups for Sitka Gold
Pair Trading with Dow Jones and Sitka Gold
The main advantage of trading using opposite Dow Jones and Sitka Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Sitka Gold 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 Sitka Gold will offset losses from the drop in Sitka Gold's 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 |
| Sitka Gold vs. Aurion Resources | Sitka Gold vs. Minera Alamos | Sitka Gold vs. Rio2 Limited | Sitka Gold vs. Roscan Gold Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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