Correlation Between Dow Jones and Dharma Polimetal

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

Diversification Opportunities for Dow Jones and Dharma Polimetal

-0.01

Correlation Coefficient

Dow Jones  Dharma Polimetal

Good diversification

The 3 months correlation between Dow and Dharma is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Dharma Polimetal Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dharma Polimetal Tbk 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 Dharma Polimetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dharma Polimetal Tbk has no effect on the direction of Dow Jones i.e., Dow Jones and Dharma Polimetal go up and down completely randomly.

Pair Corralation between Dow Jones and Dharma Polimetal

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Dharma Polimetal. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 1.55 times less risky than Dharma Polimetal. The index trades about -0.04 of its potential returns per unit of risk. The Dharma Polimetal Tbk is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  92,000  in Dharma Polimetal Tbk on December 30, 2024 and sell it today you would earn a total of  2,000  from holding Dharma Polimetal Tbk or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Dow Jones Industrial  vs.  Dharma Polimetal Tbk

Pair Trading with Dow Jones and Dharma Polimetal

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

The idea behind Dow Jones Industrial and Dharma Polimetal Tbk 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.