Correlation Between ATP 30 and Dow Jones

Can any of the company-specific risk be diversified away by investing in both ATP 30 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 ATP 30 and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ATP 30 Public and Dow Jones Industrial, you can compare the effects of market volatilities on ATP 30 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 ATP 30 with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATP 30 and Dow Jones.

Diversification Opportunities for ATP 30 and Dow Jones

0.61

Correlation Coefficient

ATP 30  Dow Jones

Poor diversification

The 3 months correlation between ATP and Dow is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding ATP 30 Public 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 ATP 30 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 ATP 30 Public 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 ATP 30 i.e., ATP 30 and Dow Jones go up and down completely randomly.

Pair Corralation between ATP 30 and Dow Jones

Assuming the 90 days trading horizon ATP 30 Public is expected to generate 3.42 times more return on investment than Dow Jones. However, ATP 30 is 3.42 times more volatile than Dow Jones Industrial. It trades about 0.07 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.14 per unit of risk. If you would invest  91.00  in ATP 30 Public on September 13, 2024 and sell it today you would earn a total of  8.00  from holding ATP 30 Public or generate 8.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

ATP 30 Public  vs.  Dow Jones Industrial

Pair Trading with ATP 30 and Dow Jones

The main advantage of trading using opposite ATP 30 and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATP 30 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 idea behind ATP 30 Public and Dow Jones Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.