Correlation Between Dow Jones and WESCO International
Can any of the company-specific risk be diversified away by investing in both Dow Jones and WESCO International 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 WESCO International 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 WESCO International, you can compare the effects of market volatilities on Dow Jones and WESCO International 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 WESCO International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and WESCO International.
Diversification Opportunities for Dow Jones and WESCO International
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and WESCO is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and WESCO International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESCO International 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 WESCO International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESCO International has no effect on the direction of Dow Jones i.e., Dow Jones and WESCO International go up and down completely randomly.
Pair Corralation between Dow Jones and WESCO International
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 3.17 times more return on investment than WESCO International. However, Dow Jones is 3.17 times more volatile than WESCO International. It trades about 0.13 of its potential returns per unit of risk. WESCO International is currently generating about 0.13 per unit of risk. If you would invest 3,541,698 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 845,337 from holding Dow Jones Industrial or generate 23.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. WESCO International
Performance |
| Timeline |
Dow Jones and WESCO International Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
WESCO International
Pair trading matchups for WESCO International
Pair Trading with Dow Jones and WESCO International
The main advantage of trading using opposite Dow Jones and WESCO International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, WESCO International 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 WESCO International will offset losses from the drop in WESCO International's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| WESCO International vs. SiriusPoint | WESCO International vs. Argo Group International | WESCO International vs. Global Ship Lease | WESCO International vs. Compass Diversified |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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