Correlation Between First Business and Dow Jones
Can any of the company-specific risk be diversified away by investing in both First Business 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 First Business and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Business Financial and Dow Jones Industrial, you can compare the effects of market volatilities on First Business 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 First Business with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Business and Dow Jones.
Diversification Opportunities for First Business and Dow Jones
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Dow is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Business Financial 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 First Business 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 First Business Financial 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 First Business i.e., First Business and Dow Jones go up and down completely randomly.
Pair Corralation between First Business and Dow Jones
Given the investment horizon of 90 days First Business Financial is expected to generate 3.27 times more return on investment than Dow Jones. However, First Business is 3.27 times more volatile than Dow Jones Industrial. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.13 per unit of risk. If you would invest 3,274 in First Business Financial on August 24, 2024 and sell it today you would earn a total of 1,774 from holding First Business Financial or generate 54.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Business Financial vs. Dow Jones Industrial
Performance |
| Timeline |
First Business and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
First Business Financial
Pair trading matchups for First Business
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with First Business and Dow Jones
The main advantage of trading using opposite First Business and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Business 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.| First Business vs. Home Federal Bancorp | First Business vs. Lake Shore Bancorp | First Business vs. Old Point Financial | First Business vs. Parke Bancorp |
| 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |