Correlation Between Health Biotchnology and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Health Biotchnology 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 Health Biotchnology and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Biotchnology Portfolio and Dow Jones Industrial, you can compare the effects of market volatilities on Health Biotchnology 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 Health Biotchnology with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Biotchnology and Dow Jones.
Diversification Opportunities for Health Biotchnology and Dow Jones
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Health and Dow is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Health Biotchnology Portfolio 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 Health Biotchnology 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 Health Biotchnology Portfolio 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 Health Biotchnology i.e., Health Biotchnology and Dow Jones go up and down completely randomly.
Pair Corralation between Health Biotchnology and Dow Jones
Assuming the 90 days horizon Health Biotchnology is expected to generate 3.55 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Health Biotchnology Portfolio is 1.0 times less risky than Dow Jones. It trades about 0.07 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Biotchnology Portfolio vs. Dow Jones Industrial
Performance |
| Timeline |
Health Biotchnology and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Health Biotchnology Portfolio
Pair trading matchups for Health Biotchnology
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Health Biotchnology and Dow Jones
The main advantage of trading using opposite Health Biotchnology and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Biotchnology 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.| Health Biotchnology vs. Artisan High Income | Health Biotchnology vs. Siit High Yield | Health Biotchnology vs. Metropolitan West High | Health Biotchnology vs. Morningstar Aggressive Growth |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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