Correlation Between Dow Jones and Concrete Pumping

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

Diversification Opportunities for Dow Jones and Concrete Pumping

0.83

Correlation Coefficient

Dow Jones  Concrete Pumping

Very poor diversification

The 3 months correlation between Dow and Concrete is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Concrete Pumping Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Concrete Pumping Holdings 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 Concrete Pumping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Concrete Pumping Holdings has no effect on the direction of Dow Jones i.e., Dow Jones and Concrete Pumping go up and down completely randomly.

Pair Corralation between Dow Jones and Concrete Pumping

Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.2 times more return on investment than Concrete Pumping. However, Dow Jones Industrial is 5.07 times less risky than Concrete Pumping. It trades about -0.04 of its potential returns per unit of risk. Concrete Pumping Holdings is currently generating about -0.01 per unit of risk. If you would invest  4,257,373  in Dow Jones Industrial on December 30, 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	Strong
Accuracy	100.0%
Values	Daily Returns

Dow Jones Industrial  vs.  Concrete Pumping Holdings

Pair Trading with Dow Jones and Concrete Pumping

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

The idea behind Dow Jones Industrial and Concrete Pumping Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..