Correlation Between Great Wes and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Great Wes 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 Great Wes and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Wes 515 and Dow Jones Industrial, you can compare the effects of market volatilities on Great Wes 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 Great Wes with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wes and Dow Jones.
Diversification Opportunities for Great Wes and Dow Jones
Very good diversification
The 3 months correlation between Great and Dow is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Great Wes 515 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 Great Wes 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 Great Wes 515 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 Great Wes i.e., Great Wes and Dow Jones go up and down completely randomly.
Pair Corralation between Great Wes and Dow Jones
Assuming the 90 days trading horizon Great Wes is expected to generate 1.38 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Great Wes 515 is 1.07 times less risky than Dow Jones. It trades about 0.11 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 3,343,335 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 1,086,316 from holding Dow Jones Industrial or generate 32.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.66% |
| Values | Daily Returns |
Great Wes 515 vs. Dow Jones Industrial
Performance |
| Timeline |
Great Wes and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Great Wes 515
Pair trading matchups for Great Wes
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Great Wes and Dow Jones
The main advantage of trading using opposite Great Wes and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wes 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.| Great Wes vs. National Bank of | Great Wes vs. Laurentian Bank | Great Wes vs. iA Financial | Great Wes vs. Bird Construction |
| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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