Correlation Between SGHC and Dow Jones
Can any of the company-specific risk be diversified away by investing in both SGHC 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 SGHC and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SGHC Limited and Dow Jones Industrial, you can compare the effects of market volatilities on SGHC 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 SGHC with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of SGHC and Dow Jones.
Diversification Opportunities for SGHC and Dow Jones
Very poor diversification
The 3 months correlation between SGHC and Dow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SGHC Limited 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 SGHC 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 SGHC Limited 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 SGHC i.e., SGHC and Dow Jones go up and down completely randomly.
Pair Corralation between SGHC and Dow Jones
Given the investment horizon of 90 days SGHC Limited is expected to generate 5.06 times more return on investment than Dow Jones. However, SGHC is 5.06 times more volatile than Dow Jones Industrial. It trades about 0.46 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of risk. If you would invest 418.00 in SGHC Limited on August 30, 2024 and sell it today you would earn a total of 255.00 from holding SGHC Limited or generate 61.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SGHC Limited vs. Dow Jones Industrial
Performance |
| Timeline |
SGHC and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
SGHC Limited
Pair trading matchups for SGHC
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with SGHC and Dow Jones
The main advantage of trading using opposite SGHC and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SGHC 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.The idea behind SGHC Limited and Dow Jones Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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