Correlation Between Dow Jones and Americas Gold
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Americas Gold 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 Americas Gold 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 Americas Gold and, you can compare the effects of market volatilities on Dow Jones and Americas Gold 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 Americas Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Americas Gold.
Diversification Opportunities for Dow Jones and Americas Gold
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Americas is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Americas Gold and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americas Gold 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 Americas Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americas Gold has no effect on the direction of Dow Jones i.e., Dow Jones and Americas Gold go up and down completely randomly.
Pair Corralation between Dow Jones and Americas Gold
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.14 times more return on investment than Americas Gold. However, Dow Jones Industrial is 6.91 times less risky than Americas Gold. It trades about -0.21 of its potential returns per unit of risk. Americas Gold and is currently generating about -0.05 per unit of risk. If you would invest 4,429,651 in Dow Jones Industrial on September 23, 2024 and sell it today you would lose (145,625) from holding Dow Jones Industrial or give up 3.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Americas Gold and
Performance |
| Timeline |
Dow Jones and Americas Gold Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Americas Gold and
Pair trading matchups for Americas Gold
Pair Trading with Dow Jones and Americas Gold
The main advantage of trading using opposite Dow Jones and Americas Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Americas Gold 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 Americas Gold will offset losses from the drop in Americas Gold's long position.| Dow Jones vs. Nok Airlines Public | Dow Jones vs. Alaska Air Group | Dow Jones vs. Universal Music Group | Dow Jones vs. Copa Holdings SA |
| Americas Gold vs. Pan American Silver | Americas Gold vs. First Majestic Silver | Americas Gold vs. MAG Silver Corp | Americas Gold vs. Silvercorp Metals |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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