Correlation Between Star Diamond and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Star Diamond 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 Star Diamond and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Star Diamond and Dow Jones Industrial, you can compare the effects of market volatilities on Star Diamond 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 Star Diamond with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Star Diamond and Dow Jones.
Diversification Opportunities for Star Diamond and Dow Jones
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Star and Dow is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Star Diamond 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 Star Diamond 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 Star Diamond 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 Star Diamond i.e., Star Diamond and Dow Jones go up and down completely randomly.
Pair Corralation between Star Diamond and Dow Jones
Assuming the 90 days horizon Star Diamond is expected to generate 26.53 times more return on investment than Dow Jones. However, Star Diamond is 26.53 times more volatile than Dow Jones Industrial. It trades about 0.13 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 1.70 in Star Diamond on October 24, 2024 and sell it today you would earn a total of 0.50 from holding Star Diamond or generate 29.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.33% |
| Values | Daily Returns |
Star Diamond vs. Dow Jones Industrial
Performance |
| Timeline |
Star Diamond and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Star Diamond
Pair trading matchups for Star Diamond
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Star Diamond and Dow Jones
The main advantage of trading using opposite Star Diamond and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Star Diamond 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.| Star Diamond vs. GMO Internet | Star Diamond vs. INTERNET INJPADR 1 | Star Diamond vs. LG Display Co | Star Diamond vs. ePlay Digital |
| Dow Jones vs. Transocean | Dow Jones vs. Noble plc | Dow Jones vs. Evolution Gaming Group | Dow Jones vs. Addus HomeCare |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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