Correlation Between Dow Jones and Swatch Group
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Swatch Group 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 Swatch Group 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 Swatch Group AG, you can compare the effects of market volatilities on Dow Jones and Swatch Group 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 Swatch Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Swatch Group.
Diversification Opportunities for Dow Jones and Swatch Group
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Swatch is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Swatch Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swatch Group AG 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 Swatch Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swatch Group AG has no effect on the direction of Dow Jones i.e., Dow Jones and Swatch Group go up and down completely randomly.
Pair Corralation between Dow Jones and Swatch Group
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.46 times more return on investment than Swatch Group. However, Dow Jones Industrial is 2.19 times less risky than Swatch Group. It trades about 0.38 of its potential returns per unit of risk. Swatch Group AG is currently generating about -0.26 per unit of risk. If you would invest 4,179,460 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 311,605 from holding Dow Jones Industrial or generate 7.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Dow Jones Industrial vs. Swatch Group AG
Performance |
| Timeline |
Dow Jones and Swatch Group Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Swatch Group AG
Pair trading matchups for Swatch Group
Pair Trading with Dow Jones and Swatch Group
The main advantage of trading using opposite Dow Jones and Swatch Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Swatch Group 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 Swatch Group will offset losses from the drop in Swatch Group's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| Swatch Group vs. Swatch Group AG | Swatch Group vs. Schindler Holding AG | Swatch Group vs. Swisscom AG | Swatch Group vs. Logitech International SA |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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