Correlation Between Pacific Basin and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Pacific Basin 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 Pacific Basin and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacific Basin Shipping and Dow Jones Industrial, you can compare the effects of market volatilities on Pacific Basin 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 Pacific Basin with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Basin and Dow Jones.
Diversification Opportunities for Pacific Basin and Dow Jones
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Pacific and Dow is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Basin Shipping 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 Pacific Basin 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 Pacific Basin Shipping 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 Pacific Basin i.e., Pacific Basin and Dow Jones go up and down completely randomly.
Pair Corralation between Pacific Basin and Dow Jones
Assuming the 90 days horizon Pacific Basin Shipping is expected to under-perform the Dow Jones. In addition to that, Pacific Basin is 3.27 times more volatile than Dow Jones Industrial. It trades about -0.15 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 4,093,693 in Dow Jones Industrial on November 2, 2024 and sell it today you would earn a total of 394,520 from holding Dow Jones Industrial or generate 9.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.04% |
| Values | Daily Returns |
Pacific Basin Shipping vs. Dow Jones Industrial
Performance |
| Timeline |
Pacific Basin and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Pacific Basin Shipping
Pair trading matchups for Pacific Basin
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Pacific Basin and Dow Jones
The main advantage of trading using opposite Pacific Basin and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Basin 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.| Pacific Basin vs. American Shipping | Pacific Basin vs. EuroDry | Pacific Basin vs. Nippon Yusen Kabushiki | Pacific Basin vs. Euroseas |
| Dow Jones vs. Boston Properties | Dow Jones vs. Suntory Beverage Food | Dow Jones vs. Envista Holdings Corp | Dow Jones vs. Fevertree Drinks Plc |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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