Correlation Between Dow Jones and Sany Heavy

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

Diversification Opportunities for Dow Jones and Sany Heavy

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Dow and Sany is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Sany Heavy Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sany Heavy Energy 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 Sany Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sany Heavy Energy has no effect on the direction of Dow Jones i.e., Dow Jones and Sany Heavy go up and down completely randomly.
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Pair Corralation between Dow Jones and Sany Heavy

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Sany Heavy. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 3.05 times less risky than Sany Heavy. The index trades about -0.14 of its potential returns per unit of risk. The Sany Heavy Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,044  in Sany Heavy Energy on September 22, 2024 and sell it today you would earn a total of  156.00  from holding Sany Heavy Energy or generate 5.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Dow Jones Industrial  vs.  Sany Heavy Energy

 Performance 
       Timeline  

Dow Jones and Sany Heavy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dow Jones and Sany Heavy

The main advantage of trading using opposite Dow Jones and Sany Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Sany Heavy 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 Sany Heavy will offset losses from the drop in Sany Heavy's long position.
The idea behind Dow Jones Industrial and Sany Heavy Energy 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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