Correlation Between Dow Jones and Veralto
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Veralto 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 Veralto 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 Veralto, you can compare the effects of market volatilities on Dow Jones and Veralto 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 Veralto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Veralto.
Diversification Opportunities for Dow Jones and Veralto
Modest diversification
The 3 months correlation between Dow and Veralto is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Veralto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veralto 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 Veralto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veralto has no effect on the direction of Dow Jones i.e., Dow Jones and Veralto go up and down completely randomly.
Pair Corralation between Dow Jones and Veralto
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.31 times less return on investment than Veralto. But when comparing it to its historical volatility, Dow Jones Industrial is 2.24 times less risky than Veralto. It trades about 0.08 of its potential returns per unit of risk. Veralto is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8,021 in Veralto on November 27, 2024 and sell it today you would earn a total of 1,986 from holding Veralto or generate 24.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 74.79% |
| Values | Daily Returns |
Dow Jones Industrial vs. Veralto
Performance |
| Timeline |
Dow Jones and Veralto Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Veralto
Pair trading matchups for Veralto
Pair Trading with Dow Jones and Veralto
The main advantage of trading using opposite Dow Jones and Veralto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Veralto 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 Veralto will offset losses from the drop in Veralto's long position.The idea behind Dow Jones Industrial and Veralto pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Veralto vs. Brunswick | Veralto vs. FDG Electric Vehicles | Veralto vs. Playa Hotels Resorts | Veralto vs. Life Time 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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