Correlation Between Dow Jones and Analog Devices
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Analog Devices 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 Analog Devices 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 Analog Devices, you can compare the effects of market volatilities on Dow Jones and Analog Devices 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 Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Analog Devices.
Diversification Opportunities for Dow Jones and Analog Devices
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dow and Analog is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Dow Jones i.e., Dow Jones and Analog Devices go up and down completely randomly.
Pair Corralation between Dow Jones and Analog Devices
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.38 times more return on investment than Analog Devices. However, Dow Jones Industrial is 2.67 times less risky than Analog Devices. It trades about -0.04 of its potential returns per unit of risk. Analog Devices is currently generating about -0.02 per unit of risk. If you would invest 4,257,373 in Dow Jones Industrial on December 28, 2024 and sell it today you would lose (98,983) from holding Dow Jones Industrial or give up 2.32% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Dow Jones Industrial vs. Analog Devices
Performance |
Timeline |
Dow Jones and Analog Devices Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Analog Devices
Pair trading matchups for Analog Devices
Pair Trading with Dow Jones and Analog Devices
The main advantage of trading using opposite Dow Jones and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.Dow Jones vs. PennantPark Investment | Dow Jones vs. Western Asset Investment | Dow Jones vs. Yoshitsu Co Ltd | Dow Jones vs. Black Hills |
Analog Devices vs. NXP Semiconductors NV | Analog Devices vs. Qualcomm Incorporated | Analog Devices vs. Broadcom | Analog Devices vs. Microchip Technology |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
Other Complementary Tools
Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |