Correlation Between Orange County and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Orange County 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 Orange County and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orange County Bancorp and Dow Jones Industrial, you can compare the effects of market volatilities on Orange County 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 Orange County with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orange County and Dow Jones.
Diversification Opportunities for Orange County and Dow Jones
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Orange and Dow is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Orange County Bancorp 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 Orange County 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 Orange County Bancorp 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 Orange County i.e., Orange County and Dow Jones go up and down completely randomly.
Pair Corralation between Orange County and Dow Jones
Considering the 90-day investment horizon Orange County is expected to generate 1.81 times less return on investment than Dow Jones. In addition to that, Orange County is 3.5 times more volatile than Dow Jones Industrial. It trades about 0.04 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of volatility. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orange County Bancorp vs. Dow Jones Industrial
Performance |
| Timeline |
Orange County and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Orange County Bancorp
Pair trading matchups for Orange County
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Orange County and Dow Jones
The main advantage of trading using opposite Orange County and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange County 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.| Orange County vs. Fifth Third Bancorp | Orange County vs. Huntington Bancshares Incorporated | Orange County vs. MT Bank |
| 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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