Correlation Between Dow Jones and Vow ASA
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Vow ASA 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 Vow ASA 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 Vow ASA, you can compare the effects of market volatilities on Dow Jones and Vow ASA 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 Vow ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Vow ASA.
Diversification Opportunities for Dow Jones and Vow ASA
Excellent diversification
The 3 months correlation between Dow and Vow is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Vow ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vow ASA 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 Vow ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vow ASA has no effect on the direction of Dow Jones i.e., Dow Jones and Vow ASA go up and down completely randomly.
Pair Corralation between Dow Jones and Vow ASA
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.17 times more return on investment than Vow ASA. However, Dow Jones Industrial is 5.94 times less risky than Vow ASA. It trades about 0.16 of its potential returns per unit of risk. Vow ASA is currently generating about -0.15 per unit of risk. If you would invest 4,233,015 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 239,191 from holding Dow Jones Industrial or generate 5.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Vow ASA
Performance |
| Timeline |
Dow Jones and Vow ASA Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Vow ASA
Pair trading matchups for Vow ASA
Pair Trading with Dow Jones and Vow ASA
The main advantage of trading using opposite Dow Jones and Vow ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Vow ASA 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 Vow ASA will offset losses from the drop in Vow ASA's long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| Vow ASA vs. Eestech | Vow ASA vs. Energy and Water | Vow ASA vs. One World Universe | Vow ASA vs. Bion Environmental Technologies |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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