Correlation Between Huaneng Power and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Huaneng Power 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 Huaneng Power and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Huaneng Power International and Dow Jones Industrial, you can compare the effects of market volatilities on Huaneng Power 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 Huaneng Power with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaneng Power and Dow Jones.
Diversification Opportunities for Huaneng Power and Dow Jones
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Huaneng and Dow is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Huaneng Power International 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 Huaneng Power 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 Huaneng Power International 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 Huaneng Power i.e., Huaneng Power and Dow Jones go up and down completely randomly.
Pair Corralation between Huaneng Power and Dow Jones
Assuming the 90 days trading horizon Huaneng Power International is expected to generate 2.87 times more return on investment than Dow Jones. However, Huaneng Power is 2.87 times more volatile than Dow Jones Industrial. It trades about 0.1 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.21 per unit of risk. If you would invest 48.00 in Huaneng Power International on September 25, 2024 and sell it today you would earn a total of 2.00 from holding Huaneng Power International or generate 4.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Huaneng Power International vs. Dow Jones Industrial
Performance |
| Timeline |
Huaneng Power and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Huaneng Power International
Pair trading matchups for Huaneng Power
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Huaneng Power and Dow Jones
The main advantage of trading using opposite Huaneng Power and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huaneng Power 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.| Huaneng Power vs. X FAB Silicon Foundries | Huaneng Power vs. Gladstone Investment | Huaneng Power vs. Chuangs China Investments | Huaneng Power vs. Strategic Investments AS |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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