Correlation Between Global Consumer and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Global Consumer 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 Global Consumer and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Consumer Public and Dow Jones Industrial, you can compare the effects of market volatilities on Global Consumer 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 Global Consumer with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Consumer and Dow Jones.
Diversification Opportunities for Global Consumer and Dow Jones
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Global and Dow is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Global Consumer Public 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 Global Consumer 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 Global Consumer Public 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 Global Consumer i.e., Global Consumer and Dow Jones go up and down completely randomly.
Pair Corralation between Global Consumer and Dow Jones
Assuming the 90 days trading horizon Global Consumer Public is expected to generate 63.45 times more return on investment than Dow Jones. However, Global Consumer is 63.45 times more volatile than Dow Jones Industrial. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 68.00 in Global Consumer Public on August 30, 2024 and sell it today you would lose (48.00) from holding Global Consumer Public or give up 70.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.18% |
| Values | Daily Returns |
Global Consumer Public vs. Dow Jones Industrial
Performance |
| Timeline |
Global Consumer and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Global Consumer Public
Pair trading matchups for Global Consumer
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Global Consumer and Dow Jones
The main advantage of trading using opposite Global Consumer and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Consumer 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.| Global Consumer vs. AJ Advance Technology | Global Consumer vs. POSCO Thainox Public | Global Consumer vs. Ichitan Group Public | Global Consumer vs. RB Food Supply |
| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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