Correlation Between Big Time and DIA
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By analyzing existing cross correlation between Big Time and DIA, you can compare the effects of market volatilities on Big Time and DIA 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 Big Time with a short position of DIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Time and DIA.
Diversification Opportunities for Big Time and DIA
Almost no diversification
The 3 months correlation between Big and DIA is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Big Time and DIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIA and Big Time 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 Big Time are associated (or correlated) with DIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIA has no effect on the direction of Big Time i.e., Big Time and DIA go up and down completely randomly.
Pair Corralation between Big Time and DIA
Assuming the 90 days trading horizon Big Time is expected to under-perform the DIA. In addition to that, Big Time is 1.3 times more volatile than DIA. It trades about -0.18 of its total potential returns per unit of risk. DIA is currently generating about -0.16 per unit of volatility. If you would invest 98.00 in DIA on December 1, 2024 and sell it today you would lose (50.00) from holding DIA or give up 51.02% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Big Time vs. DIA
Performance |
Timeline |
Big Time |
DIA |
Big Time and DIA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Big Time and DIA
The main advantage of trading using opposite Big Time and DIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Time position performs unexpectedly, DIA 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 DIA will offset losses from the drop in DIA's long position.The idea behind Big Time and DIA 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.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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