Correlation Between New Generation and Dow Jones
Can any of the company-specific risk be diversified away by investing in both New Generation 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 New Generation and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Generation Consumer and Dow Jones Industrial, you can compare the effects of market volatilities on New Generation 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 New Generation with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Generation and Dow Jones.
Diversification Opportunities for New Generation and Dow Jones
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between New and Dow is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding New Generation Consumer 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 New Generation 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 New Generation Consumer 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 New Generation i.e., New Generation and Dow Jones go up and down completely randomly.
Pair Corralation between New Generation and Dow Jones
Given the investment horizon of 90 days New Generation Consumer is expected to generate 18.13 times more return on investment than Dow Jones. However, New Generation is 18.13 times more volatile than Dow Jones Industrial. It trades about 0.03 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 0.58 in New Generation Consumer on August 30, 2024 and sell it today you would lose (0.51) from holding New Generation Consumer or give up 87.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Generation Consumer vs. Dow Jones Industrial
Performance |
| Timeline |
New Generation and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
New Generation Consumer
Pair trading matchups for New Generation
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with New Generation and Dow Jones
The main advantage of trading using opposite New Generation and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Generation 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.| New Generation vs. Green Planet Bio | New Generation vs. Azure Holding Group | New Generation vs. Four Leaf Acquisition | New Generation vs. Opus Magnum Ameris |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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