Correlation Between MEI Pharma and Dow Jones
Can any of the company-specific risk be diversified away by investing in both MEI Pharma 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 MEI Pharma and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MEI Pharma and Dow Jones Industrial, you can compare the effects of market volatilities on MEI Pharma 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 MEI Pharma with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEI Pharma and Dow Jones.
Diversification Opportunities for MEI Pharma and Dow Jones
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MEI and Dow is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding MEI Pharma 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 MEI Pharma 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 MEI Pharma 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 MEI Pharma i.e., MEI Pharma and Dow Jones go up and down completely randomly.
Pair Corralation between MEI Pharma and Dow Jones
Given the investment horizon of 90 days MEI Pharma is expected to generate 2.45 times more return on investment than Dow Jones. However, MEI Pharma is 2.45 times more volatile than Dow Jones Industrial. It trades about 0.57 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.1 per unit of risk. If you would invest 236.00 in MEI Pharma on October 22, 2024 and sell it today you would earn a total of 51.00 from holding MEI Pharma or generate 21.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MEI Pharma vs. Dow Jones Industrial
Performance |
| Timeline |
MEI Pharma and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
MEI Pharma
Pair trading matchups for MEI Pharma
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with MEI Pharma and Dow Jones
The main advantage of trading using opposite MEI Pharma and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEI Pharma 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.| MEI Pharma vs. Kezar Life Sciences | MEI Pharma vs. Vincerx Pharma | MEI Pharma vs. Avenue Therapeutics | MEI Pharma vs. Assembly Biosciences |
| Dow Jones vs. Nasdaq Inc | Dow Jones vs. Summit Materials | Dow Jones vs. Vulcan Materials | Dow Jones vs. Celsius Holdings |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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