Correlation Between FSA and Dow Jones
Can any of the company-specific risk be diversified away by investing in both FSA 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 FSA and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FSA Group and Dow Jones Industrial, you can compare the effects of market volatilities on FSA 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 FSA with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of FSA and Dow Jones.
Diversification Opportunities for FSA and Dow Jones
Excellent diversification
The 3 months correlation between FSA and Dow is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding FSA Group 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 FSA 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 FSA Group 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 FSA i.e., FSA and Dow Jones go up and down completely randomly.
Pair Corralation between FSA and Dow Jones
Assuming the 90 days trading horizon FSA Group is expected to under-perform the Dow Jones. In addition to that, FSA is 2.07 times more volatile than Dow Jones Industrial. It trades about -0.02 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.11 per unit of volatility. If you would invest 3,858,519 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 632,546 from holding Dow Jones Industrial or generate 16.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.43% |
| Values | Daily Returns |
FSA Group vs. Dow Jones Industrial
Performance |
| Timeline |
FSA and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
FSA Group
Pair trading matchups for FSA
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with FSA and Dow Jones
The main advantage of trading using opposite FSA and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FSA 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 FSA Group 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. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |