Correlation Between Dow Jones and Table Trac
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Table Trac 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 Table Trac 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 Table Trac, you can compare the effects of market volatilities on Dow Jones and Table Trac 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 Table Trac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Table Trac.
Diversification Opportunities for Dow Jones and Table Trac
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Table is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Table Trac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Table Trac 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 Table Trac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Table Trac has no effect on the direction of Dow Jones i.e., Dow Jones and Table Trac go up and down completely randomly.
Pair Corralation between Dow Jones and Table Trac
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.2 times more return on investment than Table Trac. However, Dow Jones Industrial is 5.12 times less risky than Table Trac. It trades about 0.12 of its potential returns per unit of risk. Table Trac is currently generating about 0.01 per unit of risk. If you would invest 3,383,361 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 1,107,704 from holding Dow Jones Industrial or generate 32.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.18% |
| Values | Daily Returns |
Dow Jones Industrial vs. Table Trac
Performance |
| Timeline |
Dow Jones and Table Trac Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Table Trac
Pair trading matchups for Table Trac
Pair Trading with Dow Jones and Table Trac
The main advantage of trading using opposite Dow Jones and Table Trac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Table Trac 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 Table Trac will offset losses from the drop in Table Trac's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| Table Trac vs. Banyan Tree Holdings | Table Trac vs. Nagacorp | Table Trac vs. Wynn Macau | Table Trac vs. MGM China Holdings |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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