Correlation Between Stanley Electric and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Stanley Electric 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 Stanley Electric and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stanley Electric Co and Dow Jones Industrial, you can compare the effects of market volatilities on Stanley Electric 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 Stanley Electric with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stanley Electric and Dow Jones.
Diversification Opportunities for Stanley Electric and Dow Jones
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Stanley and Dow is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Stanley Electric Co 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 Stanley Electric 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 Stanley Electric Co 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 Stanley Electric i.e., Stanley Electric and Dow Jones go up and down completely randomly.
Pair Corralation between Stanley Electric and Dow Jones
Assuming the 90 days trading horizon Stanley Electric Co is expected to under-perform the Dow Jones. In addition to that, Stanley Electric is 2.41 times more volatile than Dow Jones Industrial. It trades about -0.01 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of volatility. If you would invest 3,322,080 in Dow Jones Industrial on September 19, 2024 and sell it today you would earn a total of 1,022,910 from holding Dow Jones Industrial or generate 30.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.02% |
| Values | Daily Returns |
Stanley Electric Co vs. Dow Jones Industrial
Performance |
| Timeline |
Stanley Electric and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Stanley Electric Co
Pair trading matchups for Stanley Electric
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Stanley Electric and Dow Jones
The main advantage of trading using opposite Stanley Electric and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stanley Electric 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.| Stanley Electric vs. ZINC MEDIA GR | Stanley Electric vs. Southwest Airlines Co | Stanley Electric vs. LG Display Co | Stanley Electric vs. Tencent Music Entertainment |
| Dow Jones vs. Mangazeya Mining | Dow Jones vs. Summit Materials | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. AMCON Distributing |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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