Correlation Between Dow Jones and Korea Environment
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Korea Environment 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 Dow Jones and Korea Environment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Korea Environment Technology, you can compare the effects of market volatilities on Dow Jones and Korea Environment 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 Dow Jones with a short position of Korea Environment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Korea Environment.
Diversification Opportunities for Dow Jones and Korea Environment
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Korea is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Korea Environment Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Environment and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Korea Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Environment has no effect on the direction of Dow Jones i.e., Dow Jones and Korea Environment go up and down completely randomly.
Pair Corralation between Dow Jones and Korea Environment
Assuming the 90 days trading horizon Dow Jones is expected to generate 11.44 times less return on investment than Korea Environment. But when comparing it to its historical volatility, Dow Jones Industrial is 2.94 times less risky than Korea Environment. It trades about 0.04 of its potential returns per unit of risk. Korea Environment Technology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 742,000 in Korea Environment Technology on September 22, 2024 and sell it today you would earn a total of 158,000 from holding Korea Environment Technology or generate 21.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 96.88% |
Values | Daily Returns |
Dow Jones Industrial vs. Korea Environment Technology
Performance |
Timeline |
Dow Jones and Korea Environment Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Korea Environment Technology
Pair trading matchups for Korea Environment
Pair Trading with Dow Jones and Korea Environment
The main advantage of trading using opposite Dow Jones and Korea Environment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Korea Environment 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 Korea Environment will offset losses from the drop in Korea Environment's long position.Dow Jones vs. Hurco Companies | Dow Jones vs. Sabre Corpo | Dow Jones vs. Glacier Bancorp | Dow Jones vs. Barings BDC |
Korea Environment vs. INSUN Environmental New | Korea Environment vs. LEENO Industrial | Korea Environment vs. Kmw Inc | Korea Environment vs. NICE Information Service |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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