Correlation Between Dow Jones and Bumi Resources
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Bumi Resources 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 Bumi Resources 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 Bumi Resources Minerals, you can compare the effects of market volatilities on Dow Jones and Bumi Resources 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 Bumi Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Bumi Resources.
Diversification Opportunities for Dow Jones and Bumi Resources
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dow and Bumi is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Bumi Resources Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumi Resources Minerals 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 Bumi Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumi Resources Minerals has no effect on the direction of Dow Jones i.e., Dow Jones and Bumi Resources go up and down completely randomly.
Pair Corralation between Dow Jones and Bumi Resources
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Bumi Resources. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 5.42 times less risky than Bumi Resources. The index trades about -0.04 of its potential returns per unit of risk. The Bumi Resources Minerals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 34,600 in Bumi Resources Minerals on December 29, 2024 and sell it today you would lose (1,400) from holding Bumi Resources Minerals or give up 4.05% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 98.36% |
Values | Daily Returns |
Dow Jones Industrial vs. Bumi Resources Minerals
Performance |
Timeline |
Dow Jones and Bumi Resources Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Bumi Resources Minerals
Pair trading matchups for Bumi Resources
Pair Trading with Dow Jones and Bumi Resources
The main advantage of trading using opposite Dow Jones and Bumi Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Bumi Resources 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 Bumi Resources will offset losses from the drop in Bumi Resources' long position.Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Falcon Metals Limited | Dow Jones vs. Broadstone Net Lease | Dow Jones vs. PennantPark Investment |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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