Correlation Between Dow Jones and Square Enix
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Square Enix 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 Square Enix 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 Square Enix Holdings, you can compare the effects of market volatilities on Dow Jones and Square Enix 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 Square Enix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Square Enix.
Diversification Opportunities for Dow Jones and Square Enix
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dow and Square is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Square Enix Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Square Enix Holdings 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 Square Enix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Square Enix Holdings has no effect on the direction of Dow Jones i.e., Dow Jones and Square Enix go up and down completely randomly.
Pair Corralation between Dow Jones and Square Enix
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.22 times less return on investment than Square Enix. But when comparing it to its historical volatility, Dow Jones Industrial is 3.51 times less risky than Square Enix. It trades about 0.17 of its potential returns per unit of risk. Square Enix Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,454 in Square Enix Holdings on August 28, 2024 and sell it today you would earn a total of 545.00 from holding Square Enix Holdings or generate 37.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Square Enix Holdings
Performance |
| Timeline |
Dow Jones and Square Enix Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Square Enix Holdings
Pair trading matchups for Square Enix
Pair Trading with Dow Jones and Square Enix
The main advantage of trading using opposite Dow Jones and Square Enix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Square Enix 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 Square Enix will offset losses from the drop in Square Enix's long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| Square Enix vs. GDEV Inc | Square Enix vs. Doubledown Interactive Co | Square Enix vs. Playstudios | Square Enix vs. SohuCom |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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