Correlation Between Dow Jones and In Win

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

Diversification Opportunities for Dow Jones and In Win

Dow6117Diversified AwayDow6117Diversified Away100%
-0.02
  Correlation Coefficient

Good diversification

The 3 months correlation between Dow and 6117 is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and In Win Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on In Win Development 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 In Win. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of In Win Development has no effect on the direction of Dow Jones i.e., Dow Jones and In Win go up and down completely randomly.
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Pair Corralation between Dow Jones and In Win

Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.25 times more return on investment than In Win. However, Dow Jones Industrial is 3.95 times less risky than In Win. It trades about 0.08 of its potential returns per unit of risk. In Win Development is currently generating about -0.01 per unit of risk. If you would invest  4,202,519  in Dow Jones Industrial on September 19, 2024 and sell it today you would earn a total of  142,471  from holding Dow Jones Industrial or generate 3.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Dow Jones Industrial  vs.  In Win Development

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 05101520
JavaScript chart by amCharts 3.21.15DJI 6117
       Timeline  

Dow Jones and In Win Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.24-1.66-1.08-0.50.05940.631.211.792.372.95 0.10.20.30.40.50.60.7
JavaScript chart by amCharts 3.21.15DJI 6117
       Returns  

Pair Trading with Dow Jones and In Win

The main advantage of trading using opposite Dow Jones and In Win positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, In Win 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 In Win will offset losses from the drop in In Win's long position.
The idea behind Dow Jones Industrial and In Win Development 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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