Correlation Between Source JPX and Dow Jones
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By analyzing existing cross correlation between Source JPX Nikkei 400 and Dow Jones Industrial, you can compare the effects of market volatilities on Source JPX 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 Source JPX with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Source JPX and Dow Jones.
Diversification Opportunities for Source JPX and Dow Jones
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Source and Dow is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Source JPX Nikkei 400 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 Source JPX 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 Source JPX Nikkei 400 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 Source JPX i.e., Source JPX and Dow Jones go up and down completely randomly.
Pair Corralation between Source JPX and Dow Jones
Assuming the 90 days trading horizon Source JPX is expected to generate 6.81 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Source JPX Nikkei 400 is 1.05 times less risky than Dow Jones. It trades about 0.06 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Source JPX Nikkei 400 vs. Dow Jones Industrial
Performance |
| Timeline |
Source JPX and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Source JPX Nikkei 400
Pair trading matchups for Source JPX
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Source JPX and Dow Jones
The main advantage of trading using opposite Source JPX and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Source JPX 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.| Source JPX vs. Xtrackers Nikkei 225 | Source JPX vs. iShares VII PLC | Source JPX vs. NMI Holdings | Source JPX vs. SIVERS SEMICONDUCTORS AB |
| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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