Correlation Between Dow Jones and Moatech

Can any of the company-specific risk be diversified away by investing in both Dow Jones and Moatech 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 Moatech 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 Moatech Co, you can compare the effects of market volatilities on Dow Jones and Moatech 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 Moatech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Moatech.

Diversification Opportunities for Dow Jones and Moatech

-0.07

Correlation Coefficient

Dow Jones  Moatech

Good diversification

The 3 months correlation between Dow and Moatech is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Moatech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moatech 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 Moatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moatech has no effect on the direction of Dow Jones i.e., Dow Jones and Moatech go up and down completely randomly.

Pair Corralation between Dow Jones and Moatech

Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.69 times more return on investment than Moatech. However, Dow Jones Industrial is 1.45 times less risky than Moatech. It trades about 0.17 of its potential returns per unit of risk. Moatech Co is currently generating about -0.21 per unit of risk. If you would invest  4,332,580  in Dow Jones Industrial on October 27, 2024 and sell it today you would earn a total of  109,845  from holding Dow Jones Industrial or generate 2.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Dow Jones Industrial  vs.  Moatech Co

Pair Trading with Dow Jones and Moatech

The main advantage of trading using opposite Dow Jones and Moatech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Moatech 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 Moatech will offset losses from the drop in Moatech's long position.

The idea behind Dow Jones Industrial and Moatech Co 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.