Correlation Between Five Star and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Five Star 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 Five Star and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Five Star Bancorp and Dow Jones Industrial, you can compare the effects of market volatilities on Five Star 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 Five Star with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Star and Dow Jones.
Diversification Opportunities for Five Star and Dow Jones
Very poor diversification
The 3 months correlation between Five and Dow is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Five Star Bancorp 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 Five Star 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 Five Star Bancorp 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 Five Star i.e., Five Star and Dow Jones go up and down completely randomly.
Pair Corralation between Five Star and Dow Jones
Given the investment horizon of 90 days Five Star Bancorp is expected to generate 2.75 times more return on investment than Dow Jones. However, Five Star is 2.75 times more volatile than Dow Jones Industrial. It trades about 0.11 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.17 per unit of risk. If you would invest 2,901 in Five Star Bancorp on August 29, 2024 and sell it today you would earn a total of 431.00 from holding Five Star Bancorp or generate 14.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Five Star Bancorp vs. Dow Jones Industrial
Performance |
| Timeline |
Five Star and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Five Star Bancorp
Pair trading matchups for Five Star
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Five Star and Dow Jones
The main advantage of trading using opposite Five Star and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Star 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.| Five Star vs. Community West Bancshares | Five Star vs. First Northwest Bancorp | Five Star vs. Home Federal Bancorp | Five Star vs. First Financial Northwest |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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