Correlation Between International and Dow Jones
Can any of the company-specific risk be diversified away by investing in both International 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 International and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Co For and Dow Jones Industrial, you can compare the effects of market volatilities on International 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 International with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of International and Dow Jones.
Diversification Opportunities for International and Dow Jones
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between International and Dow is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding International Co For 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 International 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 International Co For 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 International i.e., International and Dow Jones go up and down completely randomly.
Pair Corralation between International and Dow Jones
Assuming the 90 days trading horizon International Co For is expected to generate 54.2 times more return on investment than Dow Jones. However, International is 54.2 times more volatile than Dow Jones Industrial. It trades about 0.04 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 3,521 in International Co For on September 19, 2024 and sell it today you would lose (3,171) from holding International Co For or give up 90.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 77.68% |
| Values | Daily Returns |
International Co For vs. Dow Jones Industrial
Performance |
| Timeline |
International and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
International Co For
Pair trading matchups for International
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with International and Dow Jones
The main advantage of trading using opposite International and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International 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.| International vs. Cairo Oils Soap | International vs. Al Arafa Investment | International vs. Sidi Kerir Petrochemicals | International vs. Paint Chemicals Industries |
| Dow Jones vs. Mangazeya Mining | Dow Jones vs. Summit Materials | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. AMCON Distributing |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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