Correlation Between Dow Jones and Hub24
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Hub24 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 Hub24 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 Hub24, you can compare the effects of market volatilities on Dow Jones and Hub24 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 Hub24. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Hub24.
Diversification Opportunities for Dow Jones and Hub24
Poor diversification
The 3 months correlation between Dow and Hub24 is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Hub24 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hub24 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 Hub24. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hub24 has no effect on the direction of Dow Jones i.e., Dow Jones and Hub24 go up and down completely randomly.
Pair Corralation between Dow Jones and Hub24
Assuming the 90 days trading horizon Dow Jones is expected to generate 4.81 times less return on investment than Hub24. But when comparing it to its historical volatility, Dow Jones Industrial is 1.93 times less risky than Hub24. It trades about 0.08 of its potential returns per unit of risk. Hub24 is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 4,542 in Hub24 on September 22, 2024 and sell it today you would earn a total of 2,335 from holding Hub24 or generate 51.41% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 97.71% |
Values | Daily Returns |
Dow Jones Industrial vs. Hub24
Performance |
Timeline |
Dow Jones and Hub24 Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Hub24
Pair trading matchups for Hub24
Pair Trading with Dow Jones and Hub24
The main advantage of trading using opposite Dow Jones and Hub24 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Hub24 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 Hub24 will offset losses from the drop in Hub24's long position.Dow Jones vs. Nok Airlines Public | Dow Jones vs. Alaska Air Group | Dow Jones vs. Universal Music Group | Dow Jones vs. Copa Holdings SA |
Hub24 vs. Westpac Banking | Hub24 vs. National Australia Bank | Hub24 vs. National Australia Bank | Hub24 vs. National Australia Bank |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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