Correlation Between Dow Jones and United Community
Can any of the company-specific risk be diversified away by investing in both Dow Jones and United Community 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 United Community 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 United Community Banks,, you can compare the effects of market volatilities on Dow Jones and United Community 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 United Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and United Community.
Diversification Opportunities for Dow Jones and United Community
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and United is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and United Community Banks, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Community Banks, 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 United Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Community Banks, has no effect on the direction of Dow Jones i.e., Dow Jones and United Community go up and down completely randomly.
Pair Corralation between Dow Jones and United Community
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.41 times less return on investment than United Community. But when comparing it to its historical volatility, Dow Jones Industrial is 3.5 times less risky than United Community. It trades about 0.26 of its potential returns per unit of risk. United Community Banks, is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,858 in United Community Banks, on August 29, 2024 and sell it today you would earn a total of 581.00 from holding United Community Banks, or generate 20.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. United Community Banks,
Performance |
| Timeline |
Dow Jones and United Community Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
United Community Banks,
Pair trading matchups for United Community
Pair Trading with Dow Jones and United Community
The main advantage of trading using opposite Dow Jones and United Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, United Community 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 United Community will offset losses from the drop in United Community's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| United Community vs. Alliant Energy Corp | United Community vs. PGE Corp | United Community vs. Reservoir Media | United Community vs. Transportadora de Gas |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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