Correlation Between Koninklijke Philips and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Koninklijke Philips 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 Koninklijke Philips and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Koninklijke Philips NV and Dow Jones Industrial, you can compare the effects of market volatilities on Koninklijke Philips 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 Koninklijke Philips with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke Philips and Dow Jones.
Diversification Opportunities for Koninklijke Philips and Dow Jones
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Koninklijke and Dow is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV 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 Koninklijke Philips 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 Koninklijke Philips NV 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 Koninklijke Philips i.e., Koninklijke Philips and Dow Jones go up and down completely randomly.
Pair Corralation between Koninklijke Philips and Dow Jones
Assuming the 90 days trading horizon Koninklijke Philips NV is expected to generate 3.18 times more return on investment than Dow Jones. However, Koninklijke Philips is 3.18 times more volatile than Dow Jones Industrial. It trades about 0.08 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.13 per unit of risk. If you would invest 1,741 in Koninklijke Philips NV on September 2, 2024 and sell it today you would earn a total of 779.00 from holding Koninklijke Philips NV or generate 44.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Koninklijke Philips NV vs. Dow Jones Industrial
Performance |
| Timeline |
Koninklijke Philips and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Koninklijke Philips NV
Pair trading matchups for Koninklijke Philips
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Koninklijke Philips and Dow Jones
The main advantage of trading using opposite Koninklijke Philips and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke Philips 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.| Koninklijke Philips vs. CENTURIA OFFICE REIT | Koninklijke Philips vs. Corporate Office Properties | Koninklijke Philips vs. Vishay Intertechnology | Koninklijke Philips vs. Computer And Technologies |
| Dow Jones vs. Dream Finders Homes | Dow Jones vs. GEN Restaurant Group, | Dow Jones vs. National Beverage Corp | Dow Jones vs. BJs Restaurants |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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