Correlation Between ECGI Holdings and Dow Jones
Can any of the company-specific risk be diversified away by investing in both ECGI Holdings 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 ECGI Holdings and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECGI Holdings and Dow Jones Industrial, you can compare the effects of market volatilities on ECGI Holdings 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 ECGI Holdings with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECGI Holdings and Dow Jones.
Diversification Opportunities for ECGI Holdings and Dow Jones
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ECGI and Dow is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding ECGI Holdings 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 ECGI Holdings 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 ECGI Holdings 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 ECGI Holdings i.e., ECGI Holdings and Dow Jones go up and down completely randomly.
Pair Corralation between ECGI Holdings and Dow Jones
Given the investment horizon of 90 days ECGI Holdings is expected to generate 12.48 times more return on investment than Dow Jones. However, ECGI Holdings is 12.48 times more volatile than Dow Jones Industrial. It trades about 0.03 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.18 per unit of risk. If you would invest 0.24 in ECGI Holdings on August 28, 2024 and sell it today you would lose (0.03) from holding ECGI Holdings or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
ECGI Holdings vs. Dow Jones Industrial
Performance |
| Timeline |
ECGI Holdings and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
ECGI Holdings
Pair trading matchups for ECGI Holdings
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with ECGI Holdings and Dow Jones
The main advantage of trading using opposite ECGI Holdings and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECGI Holdings 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.The idea behind ECGI Holdings and Dow Jones Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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