Correlation Between Dow Jones and TMX Group
Can any of the company-specific risk be diversified away by investing in both Dow Jones and TMX 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 TMX 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 TMX Group Limited, you can compare the effects of market volatilities on Dow Jones and TMX 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 TMX Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and TMX Group.
Diversification Opportunities for Dow Jones and TMX Group
Poor diversification
The 3 months correlation between Dow and TMX is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and TMX Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMX 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 TMX Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMX Group Limited has no effect on the direction of Dow Jones i.e., Dow Jones and TMX Group go up and down completely randomly.
Pair Corralation between Dow Jones and TMX Group
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.05 times more return on investment than TMX Group. However, Dow Jones is 1.05 times more volatile than TMX Group Limited. It trades about 0.29 of its potential returns per unit of risk. TMX Group Limited is currently generating about 0.08 per unit of risk. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 258,052 from holding Dow Jones Industrial or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. TMX Group Limited
Performance |
| Timeline |
Dow Jones and TMX Group Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
TMX Group Limited
Pair trading matchups for TMX Group
Pair Trading with Dow Jones and TMX Group
The main advantage of trading using opposite Dow Jones and TMX Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, TMX 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 TMX Group will offset losses from the drop in TMX 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 |
| TMX Group vs. Storage Vault Canada | TMX Group vs. Element Fleet Management | TMX Group vs. Pembina Pipeline Corp | TMX Group vs. Orbit Garant Drilling |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Stocks Directory Find actively traded stocks across global markets | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |