Correlation Between Dow Jones and Widgie Nickel
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Widgie Nickel 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 Widgie Nickel 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 Widgie Nickel Limited, you can compare the effects of market volatilities on Dow Jones and Widgie Nickel 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 Widgie Nickel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Widgie Nickel.
Diversification Opportunities for Dow Jones and Widgie Nickel
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Widgie is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Widgie Nickel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Widgie Nickel Limited 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 Widgie Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Widgie Nickel Limited has no effect on the direction of Dow Jones i.e., Dow Jones and Widgie Nickel go up and down completely randomly.
Pair Corralation between Dow Jones and Widgie Nickel
Assuming the 90 days trading horizon Dow Jones is expected to generate 52.73 times less return on investment than Widgie Nickel. But when comparing it to its historical volatility, Dow Jones Industrial is 59.26 times less risky than Widgie Nickel. It trades about 0.1 of its potential returns per unit of risk. Widgie Nickel Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2.50 in Widgie Nickel Limited on October 26, 2024 and sell it today you would lose (1.28) from holding Widgie Nickel Limited or give up 51.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.33% |
| Values | Daily Returns |
Dow Jones Industrial vs. Widgie Nickel Limited
Performance |
| Timeline |
Dow Jones and Widgie Nickel Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Widgie Nickel Limited
Pair trading matchups for Widgie Nickel
Pair Trading with Dow Jones and Widgie Nickel
The main advantage of trading using opposite Dow Jones and Widgie Nickel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Widgie Nickel 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 Widgie Nickel will offset losses from the drop in Widgie Nickel's long position.| Dow Jones vs. Asure Software | Dow Jones vs. Amkor Technology | Dow Jones vs. Radcom | Dow Jones vs. Senmiao Technology |
| Widgie Nickel vs. Mason Graphite | Widgie Nickel vs. Rockridge Resources | Widgie Nickel vs. Volt Lithium Corp | Widgie Nickel vs. Northern Graphite |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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