Correlation Between Dow Jones and Web Global

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Web Global 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 Web Global 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 Web Global Holdings, you can compare the effects of market volatilities on Dow Jones and Web Global 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 Web Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Web Global.

Diversification Opportunities for Dow Jones and Web Global

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Dow and Web is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Web Global Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Web Global Holdings 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 Web Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Web Global Holdings has no effect on the direction of Dow Jones i.e., Dow Jones and Web Global go up and down completely randomly.
    Optimize

Pair Corralation between Dow Jones and Web Global

If you would invest  4,109,677  in Dow Jones Industrial on September 12, 2024 and sell it today you would earn a total of  305,179  from holding Dow Jones Industrial or generate 7.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy1.56%
ValuesDaily Returns

Dow Jones Industrial  vs.  Web Global Holdings

 Performance 
       Timeline  

Dow Jones and Web Global Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dow Jones and Web Global

The main advantage of trading using opposite Dow Jones and Web Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Web Global 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 Web Global will offset losses from the drop in Web Global's long position.
The idea behind Dow Jones Industrial and Web Global Holdings 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.
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

Other Complementary Tools

Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Watchlist Optimization
Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm
Global Correlations
Find global opportunities by holding instruments from different markets