Correlation Between Powell Industries and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Powell Industries 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 Powell Industries and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Powell Industries and Dow Jones Industrial, you can compare the effects of market volatilities on Powell Industries 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 Powell Industries with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Powell Industries and Dow Jones.
Diversification Opportunities for Powell Industries and Dow Jones
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Powell and Dow is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Powell Industries 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 Powell Industries 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 Powell Industries 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 Powell Industries i.e., Powell Industries and Dow Jones go up and down completely randomly.
Pair Corralation between Powell Industries and Dow Jones
Given the investment horizon of 90 days Powell Industries is expected to generate 7.59 times more return on investment than Dow Jones. However, Powell Industries is 7.59 times more volatile than Dow Jones Industrial. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 per unit of risk. If you would invest 25,922 in Powell Industries on August 28, 2024 and sell it today you would earn a total of 2,138 from holding Powell Industries or generate 8.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Powell Industries vs. Dow Jones Industrial
Performance |
| Timeline |
Powell Industries and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Powell Industries
Pair trading matchups for Powell Industries
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Powell Industries and Dow Jones
The main advantage of trading using opposite Powell Industries and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Powell Industries 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.| Powell Industries vs. Kimball Electronics | Powell Industries vs. Hayward Holdings | Powell Industries vs. nVent Electric PLC | Powell Industries vs. Energizer Holdings |
| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
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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