Correlation Between Dow Jones and Pakistan Cables
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Pakistan Cables 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 Pakistan Cables 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 Pakistan Cables, you can compare the effects of market volatilities on Dow Jones and Pakistan Cables 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 Pakistan Cables. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Pakistan Cables.
Diversification Opportunities for Dow Jones and Pakistan Cables
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Pakistan is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Pakistan Cables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Cables 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 Pakistan Cables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Cables has no effect on the direction of Dow Jones i.e., Dow Jones and Pakistan Cables go up and down completely randomly.
Pair Corralation between Dow Jones and Pakistan Cables
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Pakistan Cables. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 4.56 times less risky than Pakistan Cables. The index trades about -0.03 of its potential returns per unit of risk. The Pakistan Cables is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 15,182 in Pakistan Cables on October 15, 2024 and sell it today you would earn a total of 5,299 from holding Pakistan Cables or generate 34.9% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.41% |
Values | Daily Returns |
Dow Jones Industrial vs. Pakistan Cables
Performance |
Timeline |
Dow Jones and Pakistan Cables Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pakistan Cables
Pair trading matchups for Pakistan Cables
Pair Trading with Dow Jones and Pakistan Cables
The main advantage of trading using opposite Dow Jones and Pakistan Cables positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Pakistan Cables 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 Pakistan Cables will offset losses from the drop in Pakistan Cables' long position.Dow Jones vs. Chipotle Mexican Grill | Dow Jones vs. Teleflex Incorporated | Dow Jones vs. Dine Brands Global | Dow Jones vs. Alvotech |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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