Correlation Between Dow Jones and Booking Holdings
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Booking Holdings 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 Booking Holdings 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 Booking Holdings, you can compare the effects of market volatilities on Dow Jones and Booking Holdings 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 Booking Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Booking Holdings.
Diversification Opportunities for Dow Jones and Booking Holdings
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Booking is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings 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 Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of Dow Jones i.e., Dow Jones and Booking Holdings go up and down completely randomly.
Pair Corralation between Dow Jones and Booking Holdings
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Booking Holdings. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 1.52 times less risky than Booking Holdings. The index trades about -0.21 of its potential returns per unit of risk. The Booking Holdings is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 516,292 in Booking Holdings on September 23, 2024 and sell it today you would lose (8,792) from holding Booking Holdings or give up 1.7% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Dow Jones Industrial vs. Booking Holdings
Performance |
Timeline |
Dow Jones and Booking Holdings Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Booking Holdings
Pair trading matchups for Booking Holdings
Pair Trading with Dow Jones and Booking Holdings
The main advantage of trading using opposite Dow Jones and Booking Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Booking Holdings 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 Booking Holdings will offset losses from the drop in Booking Holdings' long position.Dow Jones vs. Nok Airlines Public | Dow Jones vs. Alaska Air Group | Dow Jones vs. Universal Music Group | Dow Jones vs. Copa Holdings SA |
Booking Holdings vs. Viridian Therapeutics | Booking Holdings vs. AES Corp | Booking Holdings vs. CVR Energy | Booking Holdings vs. Nationwide Building Society |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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