Correlation Between Dow Jones and WuXi AppTec
Can any of the company-specific risk be diversified away by investing in both Dow Jones and WuXi AppTec 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 WuXi AppTec 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 WuXi AppTec Co, you can compare the effects of market volatilities on Dow Jones and WuXi AppTec 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 WuXi AppTec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and WuXi AppTec.
Diversification Opportunities for Dow Jones and WuXi AppTec
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and WuXi is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and WuXi AppTec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WuXi AppTec 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 WuXi AppTec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WuXi AppTec has no effect on the direction of Dow Jones i.e., Dow Jones and WuXi AppTec go up and down completely randomly.
Pair Corralation between Dow Jones and WuXi AppTec
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.55 times less return on investment than WuXi AppTec. But when comparing it to its historical volatility, Dow Jones Industrial is 8.24 times less risky than WuXi AppTec. It trades about 0.11 of its potential returns per unit of risk. WuXi AppTec Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 437.00 in WuXi AppTec Co on September 1, 2024 and sell it today you would earn a total of 118.00 from holding WuXi AppTec Co or generate 27.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.92% |
| Values | Daily Returns |
Dow Jones Industrial vs. WuXi AppTec Co
Performance |
| Timeline |
Dow Jones and WuXi AppTec Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
WuXi AppTec Co
Pair trading matchups for WuXi AppTec
Pair Trading with Dow Jones and WuXi AppTec
The main advantage of trading using opposite Dow Jones and WuXi AppTec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, WuXi AppTec 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 WuXi AppTec will offset losses from the drop in WuXi AppTec's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| WuXi AppTec vs. Danaher | WuXi AppTec vs. Danaher | WuXi AppTec vs. SIEMENS HEALTH ADR050 | WuXi AppTec vs. DexCom Inc |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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