Correlation Between Essentra Plc and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Essentra Plc 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 Essentra Plc and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Essentra plc and Dow Jones Industrial, you can compare the effects of market volatilities on Essentra Plc 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 Essentra Plc with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essentra Plc and Dow Jones.
Diversification Opportunities for Essentra Plc and Dow Jones
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Essentra and Dow is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Essentra plc 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 Essentra Plc 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 Essentra plc 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 Essentra Plc i.e., Essentra Plc and Dow Jones go up and down completely randomly.
Pair Corralation between Essentra Plc and Dow Jones
Assuming the 90 days horizon Essentra plc is expected to under-perform the Dow Jones. In addition to that, Essentra Plc is 2.92 times more volatile than Dow Jones Industrial. It trades about -0.01 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of volatility. If you would invest 3,857,103 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 633,962 from holding Dow Jones Industrial or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.18% |
| Values | Daily Returns |
Essentra plc vs. Dow Jones Industrial
Performance |
| Timeline |
Essentra Plc and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Essentra plc
Pair trading matchups for Essentra Plc
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Essentra Plc and Dow Jones
The main advantage of trading using opposite Essentra Plc and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essentra Plc 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.| Essentra Plc vs. Bridgestone | Essentra Plc vs. The Goodyear Tire | Essentra Plc vs. Sumitomo Rubber Industries | Essentra Plc vs. Zeon Corporation |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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