Correlation Between Dow Jones and FLAT CAPITAL

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

Diversification Opportunities for Dow Jones and FLAT CAPITAL

0.4

Correlation Coefficient

Dow Jones  FLAT CAPITAL

Very weak diversification

The 3 months correlation between Dow and FLAT is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and FLAT CAPITAL AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLAT CAPITAL AB 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 FLAT CAPITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLAT CAPITAL AB has no effect on the direction of Dow Jones i.e., Dow Jones and FLAT CAPITAL go up and down completely randomly.

Pair Corralation between Dow Jones and FLAT CAPITAL

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the FLAT CAPITAL. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 15.27 times less risky than FLAT CAPITAL. The index trades about -0.01 of its potential returns per unit of risk. The FLAT CAPITAL AB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  129.00  in FLAT CAPITAL AB on December 19, 2024 and sell it today you would earn a total of  63.00  from holding FLAT CAPITAL AB or generate 48.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Dow Jones Industrial  vs.  FLAT CAPITAL AB

Pair Trading with Dow Jones and FLAT CAPITAL

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

The idea behind Dow Jones Industrial and FLAT CAPITAL AB 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.