Correlation Between Dow Jones and USS Co
Can any of the company-specific risk be diversified away by investing in both Dow Jones and USS Co 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 USS Co 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 USS Co Ltd, you can compare the effects of market volatilities on Dow Jones and USS Co 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 USS Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and USS Co.
Diversification Opportunities for Dow Jones and USS Co
Average diversification
The 3 months correlation between Dow and USS is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and USS Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USS Co 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 USS Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USS Co has no effect on the direction of Dow Jones i.e., Dow Jones and USS Co go up and down completely randomly.
Pair Corralation between Dow Jones and USS Co
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.29 times more return on investment than USS Co. However, Dow Jones Industrial is 3.46 times less risky than USS Co. It trades about 0.1 of its potential returns per unit of risk. USS Co Ltd is currently generating about 0.02 per unit of risk. If you would invest 3,730,602 in Dow Jones Industrial on September 12, 2024 and sell it today you would earn a total of 694,181 from holding Dow Jones Industrial or generate 18.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Dow Jones Industrial vs. USS Co Ltd
Performance |
| Timeline |
Dow Jones and USS Co Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
USS Co Ltd
Pair trading matchups for USS Co
Pair Trading with Dow Jones and USS Co
The main advantage of trading using opposite Dow Jones and USS Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, USS Co 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 USS Co will offset losses from the drop in USS Co's long position.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
| USS Co vs. Sonic Automotive | USS Co vs. Lithia Motors | USS Co vs. AutoNation | USS Co vs. Asbury Automotive 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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