Correlation Between Big Tree and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Big Tree and Dow Jones 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 Big Tree and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Tree Cloud and Dow Jones Industrial, you can compare the effects of market volatilities on Big Tree and Dow Jones 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 Big Tree with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Tree and Dow Jones.
Diversification Opportunities for Big Tree and Dow Jones
Excellent diversification
The 3 months correlation between Big and Dow is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Big Tree Cloud and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Big Tree 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 Big Tree Cloud are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Big Tree i.e., Big Tree and Dow Jones go up and down completely randomly.
Pair Corralation between Big Tree and Dow Jones
Assuming the 90 days horizon Big Tree Cloud is expected to generate 25.73 times more return on investment than Dow Jones. However, Big Tree is 25.73 times more volatile than Dow Jones Industrial. It trades about 0.08 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 5.22 in Big Tree Cloud on August 24, 2024 and sell it today you would lose (1.22) from holding Big Tree Cloud or give up 23.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 82.26% |
| Values | Daily Returns |
Big Tree Cloud vs. Dow Jones Industrial
Performance |
| Timeline |
Big Tree and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Big Tree Cloud
Pair trading matchups for Big Tree
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Big Tree and Dow Jones
The main advantage of trading using opposite Big Tree and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Tree position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Big Tree vs. Emerson Radio | Big Tree vs. Joint Stock | Big Tree vs. Bill Com Holdings | Big Tree vs. Q2 Holdings |
| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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