Correlation Between Dow Jones and 020002AJ0

Can any of the company-specific risk be diversified away by investing in both Dow Jones and 020002AJ0 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 020002AJ0 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 ALL 69 15 MAY 38, you can compare the effects of market volatilities on Dow Jones and 020002AJ0 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 020002AJ0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and 020002AJ0.

Diversification Opportunities for Dow Jones and 020002AJ0

-0.36

Correlation Coefficient

Dow Jones  020002AJ0

Very good diversification

The 3 months correlation between Dow and 020002AJ0 is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ALL 69 15 MAY 38 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALL 69 15 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 020002AJ0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALL 69 15 has no effect on the direction of Dow Jones i.e., Dow Jones and 020002AJ0 go up and down completely randomly.

Pair Corralation between Dow Jones and 020002AJ0

Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the 020002AJ0. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 6.8 times less risky than 020002AJ0. The index trades about -0.21 of its potential returns per unit of risk. The ALL 69 15 MAY 38 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,351  in ALL 69 15 MAY 38 on September 23, 2024 and sell it today you would earn a total of  424.00  from holding ALL 69 15 MAY 38 or generate 3.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

Dow Jones Industrial  vs.  ALL 69 15 MAY 38

Pair Trading with Dow Jones and 020002AJ0

The main advantage of trading using opposite Dow Jones and 020002AJ0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, 020002AJ0 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 020002AJ0 will offset losses from the drop in 020002AJ0's long position.

The idea behind Dow Jones Industrial and ALL 69 15 MAY 38 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.