Correlation Between Dow Jones and WH Group
Can any of the company-specific risk be diversified away by investing in both Dow Jones and WH Group 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 WH Group 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 WH Group Limited, you can compare the effects of market volatilities on Dow Jones and WH Group 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 WH Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and WH Group.
Diversification Opportunities for Dow Jones and WH Group
Poor diversification
The 3 months correlation between Dow and WHGRF is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and WH Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WH Group 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 WH Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WH Group Limited has no effect on the direction of Dow Jones i.e., Dow Jones and WH Group go up and down completely randomly.
Pair Corralation between Dow Jones and WH Group
Assuming the 90 days trading horizon Dow Jones is expected to generate 19.55 times less return on investment than WH Group. But when comparing it to its historical volatility, Dow Jones Industrial is 22.71 times less risky than WH Group. It trades about 0.12 of its potential returns per unit of risk. WH Group Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 27.00 in WH Group Limited on August 31, 2024 and sell it today you would earn a total of 52.00 from holding WH Group Limited or generate 192.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 54.01% |
| Values | Daily Returns |
Dow Jones Industrial vs. WH Group Limited
Performance |
| Timeline |
Dow Jones and WH Group Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
WH Group Limited
Pair trading matchups for WH Group
Pair Trading with Dow Jones and WH Group
The main advantage of trading using opposite Dow Jones and WH Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, WH Group 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 WH Group will offset losses from the drop in WH Group's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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