Correlation Between Dow Jones and United States
Can any of the company-specific risk be diversified away by investing in both Dow Jones and United States 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 States 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 States Basketball, you can compare the effects of market volatilities on Dow Jones and United States 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 States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and United States.
Diversification Opportunities for Dow Jones and United States
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and United is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and United States Basketball in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Basketball 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 States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Basketball has no effect on the direction of Dow Jones i.e., Dow Jones and United States go up and down completely randomly.
Pair Corralation between Dow Jones and United States
Assuming the 90 days trading horizon Dow Jones is expected to generate 49.47 times less return on investment than United States. But when comparing it to its historical volatility, Dow Jones Industrial is 45.8 times less risky than United States. It trades about 0.08 of its potential returns per unit of risk. United States Basketball is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 38.00 in United States Basketball on September 4, 2024 and sell it today you would lose (11.00) from holding United States Basketball or give up 28.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 30.51% |
| Values | Daily Returns |
Dow Jones Industrial vs. United States Basketball
Performance |
| Timeline |
Dow Jones and United States Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
United States Basketball
Pair trading matchups for United States
Pair Trading with Dow Jones and United States
The main advantage of trading using opposite Dow Jones and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, United States 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 States will offset losses from the drop in United States' long position.| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
| United States vs. A1 Group | United States vs. Roth CH Acquisition | United States vs. Awaysis Capital | United States vs. Starguide Group |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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