Correlation Between Dow Jones and Terex
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Terex 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 Terex 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 Terex, you can compare the effects of market volatilities on Dow Jones and Terex 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 Terex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Terex.
Diversification Opportunities for Dow Jones and Terex
Weak diversification
The 3 months correlation between Dow and Terex is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Terex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terex 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 Terex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terex has no effect on the direction of Dow Jones i.e., Dow Jones and Terex go up and down completely randomly.
Pair Corralation between Dow Jones and Terex
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.28 times more return on investment than Terex. However, Dow Jones Industrial is 3.58 times less risky than Terex. It trades about 0.26 of its potential returns per unit of risk. Terex is currently generating about 0.03 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 234,900 from holding Dow Jones Industrial or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Terex
Performance |
| Timeline |
Dow Jones and Terex Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Terex
Pair trading matchups for Terex
Pair Trading with Dow Jones and Terex
The main advantage of trading using opposite Dow Jones and Terex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Terex 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 Terex will offset losses from the drop in Terex's long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| Terex vs. Lion Electric Corp | Terex vs. Xos Inc | Terex vs. Hydrofarm Holdings Group | Terex vs. AGCO Corporation |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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