Correlation Between Metal Sky and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Metal Sky 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 Metal Sky and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metal Sky Star and Dow Jones Industrial, you can compare the effects of market volatilities on Metal Sky 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 Metal Sky with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metal Sky and Dow Jones.
Diversification Opportunities for Metal Sky and Dow Jones
Poor diversification
The 3 months correlation between Metal and Dow is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Metal Sky Star 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 Metal Sky 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 Metal Sky Star 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 Metal Sky i.e., Metal Sky and Dow Jones go up and down completely randomly.
Pair Corralation between Metal Sky and Dow Jones
Given the investment horizon of 90 days Metal Sky Star is not expected to generate positive returns. However, Metal Sky Star is 1.05 times less risky than Dow Jones. It waists most of its returns potential to compensate for thr risk taken. Dow Jones is generating about 0.27 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Metal Sky Star vs. Dow Jones Industrial
Performance |
| Timeline |
Metal Sky and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Metal Sky Star
Pair trading matchups for Metal Sky
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Metal Sky and Dow Jones
The main advantage of trading using opposite Metal Sky and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metal Sky 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.| Metal Sky vs. Aurora Innovation | Metal Sky vs. HUMANA INC | Metal Sky vs. Aquagold International | Metal Sky vs. Barloworld Ltd ADR |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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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