Correlation Between Dow Jones and Uber Technologies
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Uber Technologies 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 Uber Technologies 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 Uber Technologies, you can compare the effects of market volatilities on Dow Jones and Uber Technologies 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 Uber Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Uber Technologies.
Diversification Opportunities for Dow Jones and Uber Technologies
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dow and Uber is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of Dow Jones i.e., Dow Jones and Uber Technologies go up and down completely randomly.
Pair Corralation between Dow Jones and Uber Technologies
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.58 times less return on investment than Uber Technologies. But when comparing it to its historical volatility, Dow Jones Industrial is 3.53 times less risky than Uber Technologies. It trades about 0.08 of its potential returns per unit of risk. Uber Technologies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,901 in Uber Technologies on December 12, 2024 and sell it today you would earn a total of 3,648 from holding Uber Technologies or generate 125.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. Uber Technologies
Performance |
| Timeline |
Dow Jones and Uber Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Uber Technologies
Pair trading matchups for Uber Technologies
Pair Trading with Dow Jones and Uber Technologies
The main advantage of trading using opposite Dow Jones and Uber Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Uber Technologies 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 Uber Technologies will offset losses from the drop in Uber Technologies' long position.| Dow Jones vs. GMO Internet | ||
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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