Correlation Between Sun Hung and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Sun Hung 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 Sun Hung and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sun Hung Kai and Dow Jones Industrial, you can compare the effects of market volatilities on Sun Hung 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 Sun Hung with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Hung and Dow Jones.
Diversification Opportunities for Sun Hung and Dow Jones
Very good diversification
The 3 months correlation between Sun and Dow is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sun Hung Kai 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 Sun Hung 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 Sun Hung Kai 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 Sun Hung i.e., Sun Hung and Dow Jones go up and down completely randomly.
Pair Corralation between Sun Hung and Dow Jones
Assuming the 90 days horizon Sun Hung Kai is expected to under-perform the Dow Jones. In addition to that, Sun Hung is 2.38 times more volatile than Dow Jones Industrial. It trades about -0.17 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.34 per unit of volatility. If you would invest 4,239,227 in Dow Jones Industrial on November 3, 2024 and sell it today you would earn a total of 215,239 from holding Dow Jones Industrial or generate 5.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Hung Kai vs. Dow Jones Industrial
Performance |
| Timeline |
Sun Hung and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Sun Hung Kai
Pair trading matchups for Sun Hung
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Sun Hung and Dow Jones
The main advantage of trading using opposite Sun Hung and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Hung 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.| Sun Hung vs. Sino Land Co | Sun Hung vs. Holiday Island Holdings | Sun Hung vs. Daiwa House Industry | Sun Hung vs. China Overseas Land |
| Dow Jones vs. Cincinnati Financial | Dow Jones vs. Kellanova | Dow Jones vs. Acme United | Dow Jones vs. Procter Gamble |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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