Correlation Between Regional Container and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Regional Container 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 Regional Container and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regional Container Lines and Dow Jones Industrial, you can compare the effects of market volatilities on Regional Container 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 Regional Container with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Container and Dow Jones.
Diversification Opportunities for Regional Container and Dow Jones
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Regional and Dow is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Regional Container Lines 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 Regional Container 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 Regional Container Lines 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 Regional Container i.e., Regional Container and Dow Jones go up and down completely randomly.
Pair Corralation between Regional Container and Dow Jones
Assuming the 90 days trading horizon Regional Container Lines is expected to generate 4.42 times more return on investment than Dow Jones. However, Regional Container is 4.42 times more volatile than Dow Jones Industrial. It trades about 0.03 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 2,215 in Regional Container Lines on August 31, 2024 and sell it today you would earn a total of 510.00 from holding Regional Container Lines or generate 23.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.06% |
| Values | Daily Returns |
Regional Container Lines vs. Dow Jones Industrial
Performance |
| Timeline |
Regional Container and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Regional Container Lines
Pair trading matchups for Regional Container
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Regional Container and Dow Jones
The main advantage of trading using opposite Regional Container and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Container 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.| Regional Container vs. Precious Shipping Public | Regional Container vs. Thoresen Thai Agencies | Regional Container vs. The Siam Cement | Regional Container vs. PTT Public |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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