Correlation Between Dow Jones and Citycon Oyj

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

Diversification Opportunities for Dow Jones and Citycon Oyj

0.67

Correlation Coefficient

Dow Jones  Citycon Oyj

Poor diversification

The 3 months correlation between Dow and Citycon is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Citycon Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citycon Oyj 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 Citycon Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citycon Oyj has no effect on the direction of Dow Jones i.e., Dow Jones and Citycon Oyj go up and down completely randomly.

Pair Corralation between Dow Jones and Citycon Oyj

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Citycon Oyj. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 2.5 times less risky than Citycon Oyj. The index trades about -0.04 of its potential returns per unit of risk. The Citycon Oyj is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  309.00  in Citycon Oyj on December 21, 2024 and sell it today you would earn a total of  14.00  from holding Citycon Oyj or generate 4.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Dow Jones Industrial  vs.  Citycon Oyj

Pair Trading with Dow Jones and Citycon Oyj

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

The idea behind Dow Jones Industrial and Citycon Oyj 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.