Correlation Between Dow Jones and Techgen Metals
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Techgen Metals 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 Techgen Metals 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 Techgen Metals, you can compare the effects of market volatilities on Dow Jones and Techgen Metals 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 Techgen Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Techgen Metals.
Diversification Opportunities for Dow Jones and Techgen Metals
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Techgen is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Techgen Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techgen Metals 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 Techgen Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techgen Metals has no effect on the direction of Dow Jones i.e., Dow Jones and Techgen Metals go up and down completely randomly.
Pair Corralation between Dow Jones and Techgen Metals
Assuming the 90 days trading horizon Dow Jones is expected to generate 4.13 times less return on investment than Techgen Metals. But when comparing it to its historical volatility, Dow Jones Industrial is 13.73 times less risky than Techgen Metals. It trades about 0.07 of its potential returns per unit of risk. Techgen Metals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 8.10 in Techgen Metals on September 19, 2024 and sell it today you would lose (4.50) from holding Techgen Metals or give up 55.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Techgen Metals
Performance |
| Timeline |
Dow Jones and Techgen Metals Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Techgen Metals
Pair trading matchups for Techgen Metals
Pair Trading with Dow Jones and Techgen Metals
The main advantage of trading using opposite Dow Jones and Techgen Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Techgen Metals 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 Techgen Metals will offset losses from the drop in Techgen Metals' long position.| Dow Jones vs. Digi International | Dow Jones vs. Grupo Televisa SAB | Dow Jones vs. United Microelectronics | Dow Jones vs. Weibo Corp |
| Techgen Metals vs. Commonwealth Bank of | Techgen Metals vs. Macquarie Bank Limited | Techgen Metals vs. National Australia Bank | Techgen Metals vs. Medibank Private |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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