Correlation Between Dow Jones and Transportadora
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Transportadora 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 Transportadora 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 Transportadora de Gas, you can compare the effects of market volatilities on Dow Jones and Transportadora 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 Transportadora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Transportadora.
Diversification Opportunities for Dow Jones and Transportadora
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Transportadora is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of Dow Jones i.e., Dow Jones and Transportadora go up and down completely randomly.
Pair Corralation between Dow Jones and Transportadora
Assuming the 90 days trading horizon Dow Jones is expected to generate 7.31 times less return on investment than Transportadora. But when comparing it to its historical volatility, Dow Jones Industrial is 6.45 times less risky than Transportadora. It trades about 0.11 of its potential returns per unit of risk. Transportadora de Gas is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 84,250 in Transportadora de Gas on September 12, 2024 and sell it today you would earn a total of 310,250 from holding Transportadora de Gas or generate 368.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.58% |
| Values | Daily Returns |
Dow Jones Industrial vs. Transportadora de Gas
Performance |
| Timeline |
Dow Jones and Transportadora Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Transportadora de Gas
Pair trading matchups for Transportadora
Pair Trading with Dow Jones and Transportadora
The main advantage of trading using opposite Dow Jones and Transportadora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Transportadora 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 Transportadora will offset losses from the drop in Transportadora's long position.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
| Transportadora vs. Agrometal SAI | Transportadora vs. Transportadora de Gas | Transportadora vs. Harmony Gold Mining | Transportadora vs. Telecom Argentina |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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