Correlation Between Dow Jones and China Southern
Can any of the company-specific risk be diversified away by investing in both Dow Jones and China Southern 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 China Southern 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 China Southern Airlines, you can compare the effects of market volatilities on Dow Jones and China Southern 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 China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and China Southern.
Diversification Opportunities for Dow Jones and China Southern
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and China is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines 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 China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of Dow Jones i.e., Dow Jones and China Southern go up and down completely randomly.
Pair Corralation between Dow Jones and China Southern
If you would invest 4,223,305 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 248,901 from holding Dow Jones Industrial or generate 5.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.35% |
| Values | Daily Returns |
Dow Jones Industrial vs. China Southern Airlines
Performance |
| Timeline |
Dow Jones and China Southern Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
China Southern Airlines
Pair trading matchups for China Southern
Pair Trading with Dow Jones and China Southern
The main advantage of trading using opposite Dow Jones and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, China Southern 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 China Southern will offset losses from the drop in China Southern's long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| China Southern vs. LAir Liquide SA | China Southern vs. Corporacion America Airports | China Southern vs. Mayfair Gold Corp | China Southern vs. Insteel Industries |
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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