Correlation Between Packages and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Packages 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 Packages and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Packages and Dow Jones Industrial, you can compare the effects of market volatilities on Packages 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 Packages with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Packages and Dow Jones.
Diversification Opportunities for Packages and Dow Jones
Poor diversification
The 3 months correlation between Packages and Dow is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Packages 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 Packages 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 Packages 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 Packages i.e., Packages and Dow Jones go up and down completely randomly.
Pair Corralation between Packages and Dow Jones
Assuming the 90 days trading horizon Packages is expected to generate 3.0 times more return on investment than Dow Jones. However, Packages is 3.0 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 0.12 per unit of risk. If you would invest 36,595 in Packages on August 31, 2024 and sell it today you would earn a total of 23,804 from holding Packages or generate 65.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.06% |
| Values | Daily Returns |
Packages vs. Dow Jones Industrial
Performance |
| Timeline |
Packages and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Packages
Pair trading matchups for Packages
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Packages and Dow Jones
The main advantage of trading using opposite Packages and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Packages 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.| Packages vs. Masood Textile Mills | Packages vs. Fauji Foods | Packages vs. KSB Pumps | Packages vs. Mari Petroleum |
| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Transaction History View history of all your transactions and understand their impact on performance |