Correlation Between Sage Group and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Sage Group 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 Sage Group and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sage Group PLC and Dow Jones Industrial, you can compare the effects of market volatilities on Sage Group 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 Sage Group with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sage Group and Dow Jones.
Diversification Opportunities for Sage Group and Dow Jones
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sage and Dow is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sage Group PLC 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 Sage Group 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 Sage Group PLC 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 Sage Group i.e., Sage Group and Dow Jones go up and down completely randomly.
Pair Corralation between Sage Group and Dow Jones
Assuming the 90 days trading horizon Sage Group PLC is expected to generate 1.13 times more return on investment than Dow Jones. However, Sage Group is 1.13 times more volatile than Dow Jones Industrial. It trades about -0.02 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.3 per unit of risk. If you would invest 129,500 in Sage Group PLC on September 24, 2024 and sell it today you would lose (500.00) from holding Sage Group PLC or give up 0.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Sage Group PLC vs. Dow Jones Industrial
Performance |
| Timeline |
Sage Group and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Sage Group PLC
Pair trading matchups for Sage Group
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Sage Group and Dow Jones
The main advantage of trading using opposite Sage Group and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sage Group 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.| Sage Group vs. Samsung Electronics Co | Sage Group vs. Samsung Electronics Co | Sage Group vs. Hyundai Motor | Sage Group vs. Toyota Motor Corp |
| Dow Jones vs. Teleflex Incorporated | Dow Jones vs. Sonida Senior Living | Dow Jones vs. Avadel Pharmaceuticals PLC | Dow Jones vs. Cardinal Health |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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