Correlation Between Dow Jones and Telia Company
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Telia Company 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 Telia Company 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 Telia Company AB, you can compare the effects of market volatilities on Dow Jones and Telia Company 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 Telia Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Telia Company.
Diversification Opportunities for Dow Jones and Telia Company
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Telia is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company 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 Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of Dow Jones i.e., Dow Jones and Telia Company go up and down completely randomly.
Pair Corralation between Dow Jones and Telia Company
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.55 times less return on investment than Telia Company. But when comparing it to its historical volatility, Dow Jones Industrial is 1.57 times less risky than Telia Company. It trades about 0.14 of its potential returns per unit of risk. Telia Company AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 225.00 in Telia Company AB on August 25, 2024 and sell it today you would earn a total of 51.00 from holding Telia Company AB or generate 22.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.69% |
| Values | Daily Returns |
Dow Jones Industrial vs. Telia Company AB
Performance |
| Timeline |
Dow Jones and Telia Company Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Telia Company AB
Pair trading matchups for Telia Company
Pair Trading with Dow Jones and Telia Company
The main advantage of trading using opposite Dow Jones and Telia Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Telia Company 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 Telia Company will offset losses from the drop in Telia Company's long position.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| Telia Company vs. Nordea Bank Abp | Telia Company vs. Sampo Oyj A | Telia Company vs. Fortum Oyj | Telia Company vs. Wartsila Oyj Abp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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