Correlation Between Maeil Dairies and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Maeil Dairies 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 Maeil Dairies and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maeil Dairies Co and Dow Jones Industrial, you can compare the effects of market volatilities on Maeil Dairies 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 Maeil Dairies with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maeil Dairies and Dow Jones.
Diversification Opportunities for Maeil Dairies and Dow Jones
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Maeil and Dow is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Maeil Dairies Co 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 Maeil Dairies 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 Maeil Dairies Co 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 Maeil Dairies i.e., Maeil Dairies and Dow Jones go up and down completely randomly.
Pair Corralation between Maeil Dairies and Dow Jones
Assuming the 90 days trading horizon Maeil Dairies Co is expected to under-perform the Dow Jones. In addition to that, Maeil Dairies is 1.17 times more volatile than Dow Jones Industrial. It trades about -0.08 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.2 per unit of volatility. If you would invest 4,093,693 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 397,372 from holding Dow Jones Industrial or generate 9.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 92.19% |
| Values | Daily Returns |
Maeil Dairies Co vs. Dow Jones Industrial
Performance |
| Timeline |
Maeil Dairies and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Maeil Dairies Co
Pair trading matchups for Maeil Dairies
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Maeil Dairies as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Maeil Dairies' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Maeil Dairies' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Maeil Dairies Co.
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Maeil Dairies and Dow Jones
The main advantage of trading using opposite Maeil Dairies and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maeil Dairies 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.The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Maeil Dairies as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Maeil Dairies' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Maeil Dairies' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Maeil Dairies Co.
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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