Correlation Between Dow Jones and Anhui Shiny

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

Diversification Opportunities for Dow Jones and Anhui Shiny

-0.16

Correlation Coefficient

Dow Jones  Anhui Shiny

Good diversification

The 3 months correlation between Dow and Anhui is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Anhui Shiny Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Shiny Electronic 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 Anhui Shiny. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Shiny Electronic has no effect on the direction of Dow Jones i.e., Dow Jones and Anhui Shiny go up and down completely randomly.

Pair Corralation between Dow Jones and Anhui Shiny

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Anhui Shiny. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 4.31 times less risky than Anhui Shiny. The index trades about -0.04 of its potential returns per unit of risk. The Anhui Shiny Electronic is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,912  in Anhui Shiny Electronic on December 23, 2024 and sell it today you would earn a total of  581.00  from holding Anhui Shiny Electronic or generate 30.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Dow Jones Industrial  vs.  Anhui Shiny Electronic

Pair Trading with Dow Jones and Anhui Shiny

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

The idea behind Dow Jones Industrial and Anhui Shiny Electronic 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..