Correlation Between Dow Jones and Chalice Mining

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

Diversification Opportunities for Dow Jones and Chalice Mining

-0.36

Correlation Coefficient

Dow Jones  Chalice Mining

Very good diversification

The 3 months correlation between Dow and Chalice is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Chalice Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chalice Mining 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 Chalice Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chalice Mining has no effect on the direction of Dow Jones i.e., Dow Jones and Chalice Mining go up and down completely randomly.

Pair Corralation between Dow Jones and Chalice Mining

Assuming the 90 days trading horizon Dow Jones is expected to generate 1.2 times less return on investment than Chalice Mining. But when comparing it to its historical volatility, Dow Jones Industrial is 6.86 times less risky than Chalice Mining. It trades about 0.11 of its potential returns per unit of risk. Chalice Mining Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  73.00  in Chalice Mining Limited on September 16, 2024 and sell it today you would lose (1.00) from holding Chalice Mining Limited or give up 1.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Dow Jones Industrial  vs.  Chalice Mining Limited

Pair Trading with Dow Jones and Chalice Mining

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

The idea behind Dow Jones Industrial and Chalice Mining Limited 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.