Correlation Between Tokyo Electron and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Tokyo Electron 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 Tokyo Electron and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tokyo Electron and Dow Jones Industrial, you can compare the effects of market volatilities on Tokyo Electron 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 Tokyo Electron with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokyo Electron and Dow Jones.
Diversification Opportunities for Tokyo Electron and Dow Jones
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tokyo and Dow is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electron 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 Tokyo Electron 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 Tokyo Electron 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 Tokyo Electron i.e., Tokyo Electron and Dow Jones go up and down completely randomly.
Pair Corralation between Tokyo Electron and Dow Jones
Assuming the 90 days horizon Tokyo Electron is expected to generate 4.97 times more return on investment than Dow Jones. However, Tokyo Electron is 4.97 times more volatile than Dow Jones Industrial. It trades about 0.13 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.1 per unit of risk. If you would invest 15,486 in Tokyo Electron on October 22, 2024 and sell it today you would earn a total of 1,278 from holding Tokyo Electron or generate 8.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Tokyo Electron vs. Dow Jones Industrial
Performance |
| Timeline |
Tokyo Electron and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Tokyo Electron
Pair trading matchups for Tokyo Electron
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Tokyo Electron and Dow Jones
The main advantage of trading using opposite Tokyo Electron and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokyo Electron 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.| Tokyo Electron vs. DiamondRock Hospitality | Tokyo Electron vs. World Houseware Limited | Tokyo Electron vs. Rocky Brands | Tokyo Electron vs. Designer Brands |
| Dow Jones vs. Nasdaq Inc | Dow Jones vs. Summit Materials | Dow Jones vs. Vulcan Materials | Dow Jones vs. Celsius Holdings |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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