Correlation Between Fletcher Building and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Fletcher Building 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 Fletcher Building and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fletcher Building Ltd and Dow Jones Industrial, you can compare the effects of market volatilities on Fletcher Building 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 Fletcher Building with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fletcher Building and Dow Jones.
Diversification Opportunities for Fletcher Building and Dow Jones
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fletcher and Dow is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fletcher Building Ltd 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 Fletcher Building 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 Fletcher Building Ltd 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 Fletcher Building i.e., Fletcher Building and Dow Jones go up and down completely randomly.
Pair Corralation between Fletcher Building and Dow Jones
Assuming the 90 days horizon Fletcher Building Ltd is expected to under-perform the Dow Jones. In addition to that, Fletcher Building is 6.17 times more volatile than Dow Jones Industrial. It trades about -0.03 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of volatility. If you would invest 3,515,104 in Dow Jones Industrial on September 14, 2024 and sell it today you would earn a total of 876,308 from holding Dow Jones Industrial or generate 24.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Fletcher Building Ltd vs. Dow Jones Industrial
Performance |
| Timeline |
Fletcher Building and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Fletcher Building Ltd
Pair trading matchups for Fletcher Building
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Fletcher Building and Dow Jones
The main advantage of trading using opposite Fletcher Building and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fletcher Building 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.| Fletcher Building vs. Cementos Pacasmayo SAA | Fletcher Building vs. Summit Materials | Fletcher Building vs. Eagle Materials | Fletcher Building vs. CRH PLC ADR |
| Dow Jones vs. Hurco Companies | Dow Jones vs. Tyson Foods | Dow Jones vs. MYR Group | Dow Jones vs. Cannae Holdings |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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