Correlation Between Nissan and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Nissan 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 Nissan and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nissan and Dow Jones Industrial, you can compare the effects of market volatilities on Nissan 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 Nissan with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nissan and Dow Jones.
Diversification Opportunities for Nissan and Dow Jones
Modest diversification
The 3 months correlation between Nissan and Dow is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nissan 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 Nissan 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 Nissan 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 Nissan i.e., Nissan and Dow Jones go up and down completely randomly.
Pair Corralation between Nissan and Dow Jones
Assuming the 90 days trading horizon Nissan is expected to generate 2.9 times more return on investment than Dow Jones. However, Nissan is 2.9 times more volatile than Dow Jones Industrial. It trades about 0.18 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 139,700 in Nissan on August 29, 2024 and sell it today you would earn a total of 25,800 from holding Nissan or generate 18.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 71.88% |
| Values | Daily Returns |
Nissan vs. Dow Jones Industrial
Performance |
| Timeline |
Nissan and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Nissan
Pair trading matchups for Nissan
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Nissan and Dow Jones
The main advantage of trading using opposite Nissan and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nissan 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.| Nissan vs. Adgar Investments and | Nissan vs. Millennium Food Tech LP | Nissan vs. Willy Food | Nissan vs. Harel Insurance Investments |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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