Correlation Between Kasten and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Kasten 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 Kasten and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kasten Inc and Dow Jones Industrial, you can compare the effects of market volatilities on Kasten 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 Kasten with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kasten and Dow Jones.
Diversification Opportunities for Kasten and Dow Jones
Significant diversification
The 3 months correlation between Kasten and Dow is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Kasten Inc 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 Kasten 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 Kasten Inc 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 Kasten i.e., Kasten and Dow Jones go up and down completely randomly.
Pair Corralation between Kasten and Dow Jones
Given the investment horizon of 90 days Kasten Inc is expected to generate 18.81 times more return on investment than Dow Jones. However, Kasten is 18.81 times more volatile than Dow Jones Industrial. It trades about 0.01 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 1.75 in Kasten Inc on September 1, 2024 and sell it today you would lose (1.15) from holding Kasten Inc or give up 65.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Kasten Inc vs. Dow Jones Industrial
Performance |
| Timeline |
Kasten and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Kasten Inc
Pair trading matchups for Kasten
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Kasten and Dow Jones
The main advantage of trading using opposite Kasten and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kasten 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.| Kasten vs. Interups | Kasten vs. Church Crawford | Kasten vs. Active Health Foods | Kasten vs. Gold Ent Group |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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