Correlation Between Dow Jones and Western Capital
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Western Capital 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 Western Capital 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 Western Capital Resources, you can compare the effects of market volatilities on Dow Jones and Western Capital 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 Western Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Western Capital.
Diversification Opportunities for Dow Jones and Western Capital
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Western is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Western Capital Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Capital Resources 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 Western Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Capital Resources has no effect on the direction of Dow Jones i.e., Dow Jones and Western Capital go up and down completely randomly.
Pair Corralation between Dow Jones and Western Capital
Assuming the 90 days trading horizon Dow Jones is expected to generate 5.37 times less return on investment than Western Capital. But when comparing it to its historical volatility, Dow Jones Industrial is 5.57 times less risky than Western Capital. It trades about 0.16 of its potential returns per unit of risk. Western Capital Resources is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 460.00 in Western Capital Resources on September 2, 2024 and sell it today you would earn a total of 468.00 from holding Western Capital Resources or generate 101.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. Western Capital Resources
Performance |
| Timeline |
Dow Jones and Western Capital Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Western Capital Resources
Pair trading matchups for Western Capital
Pair Trading with Dow Jones and Western Capital
The main advantage of trading using opposite Dow Jones and Western Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Western Capital 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 Western Capital will offset losses from the drop in Western Capital's long position.| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
| Western Capital vs. Porsche Automobile Holding | Western Capital vs. Ferrari NV | Western Capital vs. Toyota Motor | Western Capital vs. General Motors |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |