Correlation Between Dow Jones and Wrapped Beacon
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Wrapped Beacon 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 Wrapped Beacon 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 Wrapped Beacon ETH, you can compare the effects of market volatilities on Dow Jones and Wrapped Beacon 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 Wrapped Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Wrapped Beacon.
Diversification Opportunities for Dow Jones and Wrapped Beacon
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Wrapped is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Wrapped Beacon ETH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wrapped Beacon ETH 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 Wrapped Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wrapped Beacon ETH has no effect on the direction of Dow Jones i.e., Dow Jones and Wrapped Beacon go up and down completely randomly.
Pair Corralation between Dow Jones and Wrapped Beacon
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.06 times less return on investment than Wrapped Beacon. But when comparing it to its historical volatility, Dow Jones Industrial is 5.25 times less risky than Wrapped Beacon. It trades about 0.08 of its potential returns per unit of risk. Wrapped Beacon ETH is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 389,170 in Wrapped Beacon ETH on August 30, 2024 and sell it today you would lose (3,628) from holding Wrapped Beacon ETH or give up 0.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 27.82% |
| Values | Daily Returns |
Dow Jones Industrial vs. Wrapped Beacon ETH
Performance |
| Timeline |
Dow Jones and Wrapped Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Wrapped Beacon ETH
Pair trading matchups for Wrapped Beacon
Pair Trading with Dow Jones and Wrapped Beacon
The main advantage of trading using opposite Dow Jones and Wrapped Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Wrapped Beacon 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 Wrapped Beacon will offset losses from the drop in Wrapped Beacon's long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| Wrapped Beacon vs. XRP | Wrapped Beacon vs. Solana | Wrapped Beacon vs. Staked Ether | Wrapped Beacon vs. Sui |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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