Correlation Between Dow Jones and XYLEM
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By analyzing existing cross correlation between Dow Jones Industrial and XYLEM INC 325, you can compare the effects of market volatilities on Dow Jones and XYLEM 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 XYLEM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and XYLEM.
Diversification Opportunities for Dow Jones and XYLEM
Excellent diversification
The 3 months correlation between Dow and XYLEM is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and XYLEM INC 325 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XYLEM INC 325 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 XYLEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XYLEM INC 325 has no effect on the direction of Dow Jones i.e., Dow Jones and XYLEM go up and down completely randomly.
Pair Corralation between Dow Jones and XYLEM
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 4.98 times more return on investment than XYLEM. However, Dow Jones is 4.98 times more volatile than XYLEM INC 325. It trades about 0.16 of its potential returns per unit of risk. XYLEM INC 325 is currently generating about 0.13 per unit of risk. If you would invest 3,857,103 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 633,962 from holding Dow Jones Industrial or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 86.61% |
| Values | Daily Returns |
Dow Jones Industrial vs. XYLEM INC 325
Performance |
| Timeline |
Dow Jones and XYLEM Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
XYLEM INC 325
Pair trading matchups for XYLEM
Pair Trading with Dow Jones and XYLEM
The main advantage of trading using opposite Dow Jones and XYLEM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, XYLEM 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 XYLEM will offset losses from the drop in XYLEM's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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