Correlation Between Dow Jones and AVTECH Sweden

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

Diversification Opportunities for Dow Jones and AVTECH Sweden

-0.06

Correlation Coefficient

Dow Jones  AVTECH Sweden

Good diversification

The 3 months correlation between Dow and AVTECH is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and AVTECH Sweden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVTECH Sweden 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 AVTECH Sweden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVTECH Sweden AB has no effect on the direction of Dow Jones i.e., Dow Jones and AVTECH Sweden go up and down completely randomly.

Pair Corralation between Dow Jones and AVTECH Sweden

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the AVTECH Sweden. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 3.38 times less risky than AVTECH Sweden. The index trades about -0.04 of its potential returns per unit of risk. The AVTECH Sweden AB is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  590.00  in AVTECH Sweden AB on December 30, 2024 and sell it today you would earn a total of  318.00  from holding AVTECH Sweden AB or generate 53.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Dow Jones Industrial  vs.  AVTECH Sweden AB

Pair Trading with Dow Jones and AVTECH Sweden

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

The idea behind Dow Jones Industrial and AVTECH Sweden 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.