Correlation Between Mini Dow and Platinum

Can any of the company-specific risk be diversified away by investing in both Mini Dow and Platinum 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 Mini Dow and Platinum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mini Dow Jones and Platinum, you can compare the effects of market volatilities on Mini Dow and Platinum 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 Mini Dow with a short position of Platinum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mini Dow and Platinum.

Diversification Opportunities for Mini Dow and Platinum

0.2

Correlation Coefficient

Mini Dow  Platinum

Modest diversification

The 3 months correlation between Mini and Platinum is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Mini Dow Jones and Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum and Mini Dow 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 Mini Dow Jones are associated (or correlated) with Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum has no effect on the direction of Mini Dow i.e., Mini Dow and Platinum go up and down completely randomly.

Pair Corralation between Mini Dow and Platinum

Assuming the 90 days horizon Mini Dow Jones is expected to generate 0.47 times more return on investment than Platinum. However, Mini Dow Jones is 2.13 times less risky than Platinum. It trades about 0.15 of its potential returns per unit of risk. Platinum is currently generating about 0.01 per unit of risk. If you would invest  4,165,300  in Mini Dow Jones on August 30, 2024 and sell it today you would earn a total of  318,600  from holding Mini Dow Jones or generate 7.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Mini Dow Jones  vs.  Platinum

Mini Dow Jones

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mini Dow Jones are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Mini Dow may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Platinum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Platinum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Platinum is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mini Dow and Platinum

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

The idea behind Mini Dow Jones and Platinum 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.