Correlation Between Dow Jones and Thales SA
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Thales SA 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 Thales SA 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 Thales SA ADR, you can compare the effects of market volatilities on Dow Jones and Thales SA 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 Thales SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Thales SA.
Diversification Opportunities for Dow Jones and Thales SA
Weak diversification
The 3 months correlation between Dow and Thales is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Thales SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA ADR 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 Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA ADR has no effect on the direction of Dow Jones i.e., Dow Jones and Thales SA go up and down completely randomly.
Pair Corralation between Dow Jones and Thales SA
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.22 times less return on investment than Thales SA. But when comparing it to its historical volatility, Dow Jones Industrial is 2.2 times less risky than Thales SA. It trades about 0.07 of its potential returns per unit of risk. Thales SA ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,457 in Thales SA ADR on August 24, 2024 and sell it today you would earn a total of 743.00 from holding Thales SA ADR or generate 30.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. Thales SA ADR
Performance |
| Timeline |
Dow Jones and Thales SA Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Thales SA ADR
Pair trading matchups for Thales SA
Pair Trading with Dow Jones and Thales SA
The main advantage of trading using opposite Dow Jones and Thales SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Thales SA 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 Thales SA will offset losses from the drop in Thales SA's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Thales SA vs. Safran SA | Thales SA vs. Moog Inc | Thales SA vs. BAE Systems PLC | Thales SA vs. Airbus Group SE |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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