Correlation Between AMERICAN and Dow Jones
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By analyzing existing cross correlation between AMERICAN HONDA FINANCE and Dow Jones Industrial, you can compare the effects of market volatilities on AMERICAN 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 AMERICAN with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMERICAN and Dow Jones.
Diversification Opportunities for AMERICAN and Dow Jones
Average diversification
The 3 months correlation between AMERICAN and Dow is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding AMERICAN HONDA FINANCE 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 AMERICAN 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 AMERICAN HONDA FINANCE 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 AMERICAN i.e., AMERICAN and Dow Jones go up and down completely randomly.
Pair Corralation between AMERICAN and Dow Jones
Assuming the 90 days trading horizon AMERICAN HONDA FINANCE is expected to generate 0.19 times more return on investment than Dow Jones. However, AMERICAN HONDA FINANCE is 5.32 times less risky than Dow Jones. It trades about 0.02 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.16 per unit of risk. If you would invest 9,854 in AMERICAN HONDA FINANCE on December 1, 2024 and sell it today you would earn a total of 6.00 from holding AMERICAN HONDA FINANCE or generate 0.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
AMERICAN HONDA FINANCE vs. Dow Jones Industrial
Performance |
| Timeline |
AMERICAN and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
AMERICAN HONDA FINANCE
Pair trading matchups for AMERICAN
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with AMERICAN and Dow Jones
The main advantage of trading using opposite AMERICAN and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMERICAN 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.| AMERICAN vs. High Performance Beverages | AMERICAN vs. PepsiCo | AMERICAN vs. SNDL Inc | AMERICAN vs. Fomento Economico Mexicano |
| Dow Jones vs. Cannae Holdings | Dow Jones vs. Fidus Investment Corp | Dow Jones vs. SEI Investments | Dow Jones vs. Cracker Barrel Old |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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