Correlation Between ITM Power and Dow Jones
Can any of the company-specific risk be diversified away by investing in both ITM 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 ITM 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 ITM Power Plc and Dow Jones Industrial, you can compare the effects of market volatilities on ITM 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 ITM Power with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITM Power and Dow Jones.
Diversification Opportunities for ITM Power and Dow Jones
Very good diversification
The 3 months correlation between ITM and Dow is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding ITM Power 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 ITM 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 ITM Power 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 ITM Power i.e., ITM Power and Dow Jones go up and down completely randomly.
Pair Corralation between ITM Power and Dow Jones
Assuming the 90 days horizon ITM Power Plc is expected to under-perform the Dow Jones. In addition to that, ITM Power is 5.15 times more volatile than Dow Jones Industrial. It trades about -0.08 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of volatility. If you would invest 4,093,693 in Dow Jones Industrial on November 2, 2024 and sell it today you would earn a total of 394,520 from holding Dow Jones Industrial or generate 9.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.04% |
| Values | Daily Returns |
ITM Power Plc vs. Dow Jones Industrial
Performance |
| Timeline |
ITM Power and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
ITM Power Plc
Pair trading matchups for ITM Power
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with ITM Power and Dow Jones
The main advantage of trading using opposite ITM Power and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITM 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.| ITM Power vs. Next Hydrogen Solutions | ITM Power vs. Nel ASA | ITM Power vs. Titan Logix Corp | ITM Power vs. Weir Group PLC |
| Dow Jones vs. Boston Properties | Dow Jones vs. Suntory Beverage Food | Dow Jones vs. Envista Holdings Corp | Dow Jones vs. Fevertree Drinks Plc |
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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