Correlation Between Dow Jones and Binh Thanh

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

Diversification Opportunities for Dow Jones and Binh Thanh

-0.66

Correlation Coefficient

Dow Jones  Binh Thanh

Excellent diversification

The 3 months correlation between Dow and Binh is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Binh Thanh Import in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binh Thanh Import 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 Binh Thanh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binh Thanh Import has no effect on the direction of Dow Jones i.e., Dow Jones and Binh Thanh go up and down completely randomly.

Pair Corralation between Dow Jones and Binh Thanh

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Binh Thanh. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 2.67 times less risky than Binh Thanh. The index trades about -0.13 of its potential returns per unit of risk. The Binh Thanh Import is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,005,000  in Binh Thanh Import on September 20, 2024 and sell it today you would earn a total of  185,000  from holding Binh Thanh Import or generate 9.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Dow Jones Industrial  vs.  Binh Thanh Import

Pair Trading with Dow Jones and Binh Thanh

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

The idea behind Dow Jones Industrial and Binh Thanh Import 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.