Correlation Between Stock Exchange and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Stock Exchange 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 Stock Exchange and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stock Exchange Of and Dow Jones Industrial, you can compare the effects of market volatilities on Stock Exchange 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 Stock Exchange with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stock Exchange and Dow Jones.
Diversification Opportunities for Stock Exchange and Dow Jones
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stock and Dow is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Stock Exchange Of 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 Stock Exchange 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 Stock Exchange Of 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 Stock Exchange i.e., Stock Exchange and Dow Jones go up and down completely randomly.
Pair Corralation between Stock Exchange and Dow Jones
Assuming the 90 days trading horizon Stock Exchange Of is expected to under-perform the Dow Jones. But the index apears to be less risky and, when comparing its historical volatility, Stock Exchange Of is 1.58 times less risky than Dow Jones. The index trades about -0.2 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Stock Exchange Of vs. Dow Jones Industrial
Performance |
| Timeline |
Stock Exchange and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Stock Exchange Of
Pair trading matchups for Stock Exchange
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Stock Exchange and Dow Jones
The main advantage of trading using opposite Stock Exchange and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stock Exchange 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.| Stock Exchange vs. Porn Prom Metal | Stock Exchange vs. WHA Industrial Leasehold | Stock Exchange vs. 2S Metal Public | Stock Exchange vs. Turnkey Communication Services |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |