Correlation Between Global Technology and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Global Technology 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 Technology 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 Technology Acquisition and Dow Jones Industrial, you can compare the effects of market volatilities on Global Technology 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 Technology with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Technology and Dow Jones.
Diversification Opportunities for Global Technology and Dow Jones
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Global and Dow is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Global Technology Acquisition 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 Technology 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 Technology Acquisition 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 Technology i.e., Global Technology and Dow Jones go up and down completely randomly.
Pair Corralation between Global Technology and Dow Jones
Assuming the 90 days horizon Global Technology is expected to generate 2.51 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Global Technology Acquisition is 1.81 times less risky than Dow Jones. It trades about 0.1 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,885,286 in Dow Jones Industrial on August 26, 2024 and sell it today you would earn a total of 544,365 from holding Dow Jones Industrial or generate 14.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 81.1% |
| Values | Daily Returns |
Global Technology Acquisition vs. Dow Jones Industrial
Performance |
| Timeline |
Global Technology and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Global Technology Acquisition
Pair trading matchups for Global Technology
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Global Technology and Dow Jones
The main advantage of trading using opposite Global Technology and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Technology 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 Technology vs. VirnetX Holding Corp | Global Technology vs. ACG Metals Limited | Global Technology vs. Rackspace Technology | Global Technology vs. Q2 Holdings |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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