Correlation Between South32 and Dow Jones
Can any of the company-specific risk be diversified away by investing in both South32 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 South32 and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South32 Limited and Dow Jones Industrial, you can compare the effects of market volatilities on South32 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 South32 with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and Dow Jones.
Diversification Opportunities for South32 and Dow Jones
Poor diversification
The 3 months correlation between South32 and Dow is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding South32 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 South32 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 South32 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 South32 i.e., South32 and Dow Jones go up and down completely randomly.
Pair Corralation between South32 and Dow Jones
Assuming the 90 days horizon South32 Limited is expected to under-perform the Dow Jones. In addition to that, South32 is 2.5 times more volatile than Dow Jones Industrial. It trades about -0.1 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 per unit of volatility. 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
South32 Limited vs. Dow Jones Industrial
Performance |
| Timeline |
South32 and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
South32 Limited
Pair trading matchups for South32
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with South32 and Dow Jones
The main advantage of trading using opposite South32 and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 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.| South32 vs. IGO Limited | South32 vs. Anglo American PLC | South32 vs. TNG Limited | South32 vs. Amarc Resources |
| 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Stocks Directory Find actively traded stocks across global markets |