Correlation Between Dow Jones and Snap On
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Snap On 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 Snap On 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 Snap On, you can compare the effects of market volatilities on Dow Jones and Snap On 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 Snap On. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Snap On.
Diversification Opportunities for Dow Jones and Snap On
Very poor diversification
The 3 months correlation between Dow and Snap is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Snap On in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap On 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 Snap On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap On has no effect on the direction of Dow Jones i.e., Dow Jones and Snap On go up and down completely randomly.
Pair Corralation between Dow Jones and Snap On
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.66 times less return on investment than Snap On. But when comparing it to its historical volatility, Dow Jones Industrial is 2.05 times less risky than Snap On. It trades about 0.09 of its potential returns per unit of risk. Snap On is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 24,436 in Snap On on August 27, 2024 and sell it today you would earn a total of 12,628 from holding Snap On or generate 51.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Snap On
Performance |
| Timeline |
Dow Jones and Snap On Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Snap On
Pair trading matchups for Snap On
Pair Trading with Dow Jones and Snap On
The main advantage of trading using opposite Dow Jones and Snap On positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Snap On 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 Snap On will offset losses from the drop in Snap On's long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| Snap On vs. Lincoln Electric Holdings | Snap On vs. Timken Company | Snap On vs. Kennametal | Snap On vs. Toro Co |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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