Correlation Between Dow Jones and Aeroports
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Aeroports 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 Aeroports 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 Aeroports de Paris, you can compare the effects of market volatilities on Dow Jones and Aeroports 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 Aeroports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Aeroports.
Diversification Opportunities for Dow Jones and Aeroports
Pay attention - limited upside
The 3 months correlation between Dow and Aeroports is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Aeroports de Paris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeroports de Paris 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 Aeroports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeroports de Paris has no effect on the direction of Dow Jones i.e., Dow Jones and Aeroports go up and down completely randomly.
Pair Corralation between Dow Jones and Aeroports
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.74 times more return on investment than Aeroports. However, Dow Jones Industrial is 1.35 times less risky than Aeroports. It trades about 0.2 of its potential returns per unit of risk. Aeroports de Paris is currently generating about 0.04 per unit of risk. If you would invest 4,201,159 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 289,906 from holding Dow Jones Industrial or generate 6.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Dow Jones Industrial vs. Aeroports de Paris
Performance |
| Timeline |
Dow Jones and Aeroports Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Aeroports de Paris
Pair trading matchups for Aeroports
Pair Trading with Dow Jones and Aeroports
The main advantage of trading using opposite Dow Jones and Aeroports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Aeroports 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 Aeroports will offset losses from the drop in Aeroports' long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| Aeroports vs. Bumrungrad Hospital Public | Aeroports vs. ASURE SOFTWARE | Aeroports vs. GUARDANT HEALTH CL | Aeroports vs. CPU SOFTWAREHOUSE |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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