Correlation Between HOT and Dow Jones
Can any of the company-specific risk be diversified away by investing in both HOT 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 HOT and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HOT and Dow Jones Industrial, you can compare the effects of market volatilities on HOT 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 HOT with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of HOT and Dow Jones.
Diversification Opportunities for HOT and Dow Jones
Poor diversification
The 3 months correlation between HOT and Dow is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding HOT 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 HOT 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 HOT 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 HOT i.e., HOT and Dow Jones go up and down completely randomly.
Pair Corralation between HOT and Dow Jones
Assuming the 90 days trading horizon HOT is expected to generate 9.09 times more return on investment than Dow Jones. However, HOT is 9.09 times more volatile than Dow Jones Industrial. It trades about 0.2 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of risk. If you would invest 0.19 in HOT on August 28, 2024 and sell it today you would earn a total of 0.12 from holding HOT or generate 66.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HOT vs. Dow Jones Industrial
Performance |
| Timeline |
HOT and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
HOT
Pair trading matchups for HOT
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with HOT and Dow Jones
The main advantage of trading using opposite HOT and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HOT 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.The idea behind HOT and Dow Jones Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |