Correlation Between Information Services and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Information Services 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 Information Services and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Information Services and Dow Jones Industrial, you can compare the effects of market volatilities on Information Services 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 Information Services with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Services and Dow Jones.
Diversification Opportunities for Information Services and Dow Jones
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Information and Dow is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Information Services 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 Information Services 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 Information Services 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 Information Services i.e., Information Services and Dow Jones go up and down completely randomly.
Pair Corralation between Information Services and Dow Jones
Assuming the 90 days trading horizon Information Services is expected to generate 1.7 times more return on investment than Dow Jones. However, Information Services is 1.7 times more volatile than Dow Jones Industrial. It trades about 0.11 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.17 per unit of risk. If you would invest 2,637 in Information Services on October 20, 2024 and sell it today you would earn a total of 71.00 from holding Information Services or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Information Services vs. Dow Jones Industrial
Performance |
| Timeline |
Information Services and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Information Services
Pair trading matchups for Information Services
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Information Services and Dow Jones
The main advantage of trading using opposite Information Services and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Services 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.| Information Services vs. Vizsla Silver Corp | Information Services vs. Forsys Metals Corp | Information Services vs. Medical Facilities | Information Services vs. Dream Office Real |
| Dow Jones vs. SkyWest | Dow Jones vs. Air Transport Services | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Emerson Radio |
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.
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