Correlation Between Dow Jones and Sims Metal
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Sims Metal 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 Sims Metal 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 Sims Metal Management, you can compare the effects of market volatilities on Dow Jones and Sims Metal 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 Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Sims Metal.
Diversification Opportunities for Dow Jones and Sims Metal
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and Sims is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management 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 Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of Dow Jones i.e., Dow Jones and Sims Metal go up and down completely randomly.
Pair Corralation between Dow Jones and Sims Metal
If you would invest 4,179,460 in Dow Jones Industrial on September 4, 2024 and sell it today you would earn a total of 298,740 from holding Dow Jones Industrial or generate 7.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Dow Jones Industrial vs. Sims Metal Management
Performance |
| Timeline |
Dow Jones and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Sims Metal Management
Pair trading matchups for Sims Metal
Pair Trading with Dow Jones and Sims Metal
The main advantage of trading using opposite Dow Jones and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
| Sims Metal vs. Steel Dynamics | Sims Metal vs. Cleveland Cliffs | Sims Metal vs. United States Steel | Sims Metal vs. ArcelorMittal SA ADR |
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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