Correlation Between TMT Investments and Dow Jones
Can any of the company-specific risk be diversified away by investing in both TMT Investments 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 TMT Investments and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TMT Investments PLC and Dow Jones Industrial, you can compare the effects of market volatilities on TMT Investments 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 TMT Investments with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMT Investments and Dow Jones.
Diversification Opportunities for TMT Investments and Dow Jones
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between TMT and Dow is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding TMT Investments PLC 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 TMT Investments 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 TMT Investments PLC 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 TMT Investments i.e., TMT Investments and Dow Jones go up and down completely randomly.
Pair Corralation between TMT Investments and Dow Jones
Assuming the 90 days trading horizon TMT Investments PLC is expected to under-perform the Dow Jones. In addition to that, TMT Investments is 1.52 times more volatile than Dow Jones Industrial. It trades about -0.19 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 4,252,836 in Dow Jones Industrial on November 8, 2024 and sell it today you would earn a total of 234,492 from holding Dow Jones Industrial or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
TMT Investments PLC vs. Dow Jones Industrial
Performance |
| Timeline |
TMT Investments and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
TMT Investments PLC
Pair trading matchups for TMT Investments
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with TMT Investments and Dow Jones
The main advantage of trading using opposite TMT Investments and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMT Investments 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.| TMT Investments vs. CVS Health Corp | TMT Investments vs. Spire Healthcare Group | TMT Investments vs. Creo Medical Group | TMT Investments vs. Optima Health plc |
| Dow Jones vs. National Vision Holdings | Dow Jones vs. Grocery Outlet Holding | Dow Jones vs. Asbury Automotive Group | Dow Jones vs. Hanover Foods |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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