Correlation Between Telstra and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Telstra 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 Telstra and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telstra and Dow Jones Industrial, you can compare the effects of market volatilities on Telstra 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 Telstra with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telstra and Dow Jones.
Diversification Opportunities for Telstra and Dow Jones
Good diversification
The 3 months correlation between Telstra and Dow is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Telstra 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 Telstra 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 Telstra 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 Telstra i.e., Telstra and Dow Jones go up and down completely randomly.
Pair Corralation between Telstra and Dow Jones
Assuming the 90 days trading horizon Telstra is expected to generate 0.78 times more return on investment than Dow Jones. However, Telstra is 1.29 times less risky than Dow Jones. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.01 per unit of risk. If you would invest 386.00 in Telstra on October 19, 2024 and sell it today you would earn a total of 14.00 from holding Telstra or generate 3.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telstra vs. Dow Jones Industrial
Performance |
| Timeline |
Telstra and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Telstra
Pair trading matchups for Telstra
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Telstra and Dow Jones
The main advantage of trading using opposite Telstra and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telstra 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.| Telstra vs. Ainsworth Game Technology | Telstra vs. Super Retail Group | Telstra vs. Sandon Capital Investments | Telstra vs. Qbe Insurance Group |
| Dow Jones vs. Aluminum of | Dow Jones vs. Adtalem Global Education | Dow Jones vs. East Africa Metals | Dow Jones vs. Western Copper and |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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