Correlation Between Dow Jones and Snap-on Incorporated
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Snap-on Incorporated 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 Incorporated 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 Incorporated, you can compare the effects of market volatilities on Dow Jones and Snap-on Incorporated 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 Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Snap-on Incorporated.
Diversification Opportunities for Dow Jones and Snap-on Incorporated
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Snap-on is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Snap on Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap-on Incorporated 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 Incorporated. 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 Incorporated has no effect on the direction of Dow Jones i.e., Dow Jones and Snap-on Incorporated go up and down completely randomly.
Pair Corralation between Dow Jones and Snap-on Incorporated
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.98 times less return on investment than Snap-on Incorporated. But when comparing it to its historical volatility, Dow Jones Industrial is 1.82 times less risky than Snap-on Incorporated. It trades about 0.34 of its potential returns per unit of risk. Snap on Incorporated is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 30,474 in Snap on Incorporated on September 2, 2024 and sell it today you would earn a total of 4,396 from holding Snap on Incorporated or generate 14.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Snap on Incorporated
Performance |
| Timeline |
Dow Jones and Snap-on Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Snap on Incorporated
Pair trading matchups for Snap-on Incorporated
Pair Trading with Dow Jones and Snap-on Incorporated
The main advantage of trading using opposite Dow Jones and Snap-on Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Snap-on Incorporated 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 Incorporated will offset losses from the drop in Snap-on Incorporated'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 |
| Snap-on Incorporated vs. Brockhaus Capital Management | Snap-on Incorporated vs. Darden Restaurants | Snap-on Incorporated vs. Digilife Technologies Limited | Snap-on Incorporated vs. BJs Restaurants |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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