Correlation Between Dow Jones and Sportsquest
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Sportsquest 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 Sportsquest 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 Sportsquest, you can compare the effects of market volatilities on Dow Jones and Sportsquest 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 Sportsquest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Sportsquest.
Diversification Opportunities for Dow Jones and Sportsquest
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Sportsquest is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Sportsquest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sportsquest 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 Sportsquest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sportsquest has no effect on the direction of Dow Jones i.e., Dow Jones and Sportsquest go up and down completely randomly.
Pair Corralation between Dow Jones and Sportsquest
Assuming the 90 days trading horizon Dow Jones is expected to generate 8.48 times less return on investment than Sportsquest. But when comparing it to its historical volatility, Dow Jones Industrial is 25.1 times less risky than Sportsquest. It trades about 0.13 of its potential returns per unit of risk. Sportsquest is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 0.10 in Sportsquest on September 2, 2024 and sell it today you would lose (0.08) from holding Sportsquest or give up 80.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Sportsquest
Performance |
| Timeline |
Dow Jones and Sportsquest Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Sportsquest
Pair trading matchups for Sportsquest
Pair Trading with Dow Jones and Sportsquest
The main advantage of trading using opposite Dow Jones and Sportsquest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Sportsquest 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 Sportsquest will offset losses from the drop in Sportsquest's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| Sportsquest vs. Parks America | Sportsquest vs. Mattel Inc | Sportsquest vs. Carnival Plc ADS | Sportsquest vs. Hasbro Inc |
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 Correlations module to find global opportunities by holding instruments from different markets.
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