Correlation Between Dow Jones and Steel Public
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Steel Public 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 Steel Public 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 The Steel Public, you can compare the effects of market volatilities on Dow Jones and Steel Public 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 Steel Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Steel Public.
Diversification Opportunities for Dow Jones and Steel Public
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Steel is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and The Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Public 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 Steel Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Public has no effect on the direction of Dow Jones i.e., Dow Jones and Steel Public go up and down completely randomly.
Pair Corralation between Dow Jones and Steel Public
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.32 times more return on investment than Steel Public. However, Dow Jones Industrial is 3.13 times less risky than Steel Public. It trades about 0.26 of its potential returns per unit of risk. The Steel Public is currently generating about -0.2 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. The Steel Public
Performance |
| Timeline |
Dow Jones and Steel Public Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
The Steel Public
Pair trading matchups for Steel Public
Pair Trading with Dow Jones and Steel Public
The main advantage of trading using opposite Dow Jones and Steel Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Steel Public 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 Steel Public will offset losses from the drop in Steel Public'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 |
| Steel Public vs. TMT Steel Public | Steel Public vs. Tycoons Worldwide Group | Steel Public vs. Thai German Products Public | Steel Public vs. Siam Steel Service |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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