Correlation Between Northern Bear and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Northern Bear 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 Northern Bear and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Bear Plc and Dow Jones Industrial, you can compare the effects of market volatilities on Northern Bear 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 Northern Bear with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Bear and Dow Jones.
Diversification Opportunities for Northern Bear and Dow Jones
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Northern and Dow is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Northern Bear Plc 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 Northern Bear 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 Northern Bear Plc 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 Northern Bear i.e., Northern Bear and Dow Jones go up and down completely randomly.
Pair Corralation between Northern Bear and Dow Jones
Assuming the 90 days trading horizon Northern Bear is expected to generate 2.14 times less return on investment than Dow Jones. In addition to that, Northern Bear is 2.76 times more volatile than Dow Jones Industrial. It trades about 0.02 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of volatility. If you would invest 3,303,593 in Dow Jones Industrial on September 19, 2024 and sell it today you would earn a total of 929,094 from holding Dow Jones Industrial or generate 28.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Bear Plc vs. Dow Jones Industrial
Performance |
| Timeline |
Northern Bear and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Northern Bear Plc
Pair trading matchups for Northern Bear
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Northern Bear and Dow Jones
The main advantage of trading using opposite Northern Bear and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Bear 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.| Northern Bear vs. Ross Stores | Northern Bear vs. Bell Food Group | Northern Bear vs. Gamma Communications PLC | Northern Bear vs. Verizon Communications |
| Dow Jones vs. Mangazeya Mining | Dow Jones vs. Summit Materials | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. AMCON Distributing |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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