Correlation Between BHG Group and Dow Jones

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both BHG Group and Dow Jones 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 BHG Group and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHG Group AB and Dow Jones Industrial, you can compare the effects of market volatilities on BHG Group and Dow Jones 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 BHG Group with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHG Group and Dow Jones.

Diversification Opportunities for BHG Group and Dow Jones

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between BHG and Dow is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BHG Group AB and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and BHG Group 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 BHG Group AB are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of BHG Group i.e., BHG Group and Dow Jones go up and down completely randomly.
    Optimize

Pair Corralation between BHG Group and Dow Jones

Assuming the 90 days trading horizon BHG Group AB is expected to generate 5.21 times more return on investment than Dow Jones. However, BHG Group is 5.21 times more volatile than Dow Jones Industrial. It trades about 0.15 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.18 per unit of risk. If you would invest  1,444  in BHG Group AB on September 11, 2024 and sell it today you would earn a total of  570.00  from holding BHG Group AB or generate 39.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.44%
ValuesDaily Returns

BHG Group AB  vs.  Dow Jones Industrial

 Performance 
       Timeline  

BHG Group and Dow Jones Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BHG Group and Dow Jones

The main advantage of trading using opposite BHG Group and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHG Group position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.
The idea behind BHG Group AB and Dow Jones Industrial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

Other Complementary Tools

Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Commodity Directory
Find actively traded commodities issued by global exchanges
Economic Indicators
Top statistical indicators that provide insights into how an economy is performing