Correlation Between Dow Jones and KLP AksjeGlobal

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

Diversification Opportunities for Dow Jones and KLP AksjeGlobal

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Dow and KLP is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and KLP AksjeGlobal Flerfaktor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLP AksjeGlobal Fler 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 KLP AksjeGlobal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLP AksjeGlobal Fler has no effect on the direction of Dow Jones i.e., Dow Jones and KLP AksjeGlobal go up and down completely randomly.
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Pair Corralation between Dow Jones and KLP AksjeGlobal

Assuming the 90 days trading horizon Dow Jones is expected to generate 1.08 times less return on investment than KLP AksjeGlobal. In addition to that, Dow Jones is 1.38 times more volatile than KLP AksjeGlobal Flerfaktor. It trades about 0.08 of its total potential returns per unit of risk. KLP AksjeGlobal Flerfaktor is currently generating about 0.13 per unit of volatility. If you would invest  174,277  in KLP AksjeGlobal Flerfaktor on September 18, 2024 and sell it today you would earn a total of  65,258  from holding KLP AksjeGlobal Flerfaktor or generate 37.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy98.61%
ValuesDaily Returns

Dow Jones Industrial  vs.  KLP AksjeGlobal Flerfaktor

 Performance 
       Timeline  

Dow Jones and KLP AksjeGlobal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dow Jones and KLP AksjeGlobal

The main advantage of trading using opposite Dow Jones and KLP AksjeGlobal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, KLP AksjeGlobal 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 KLP AksjeGlobal will offset losses from the drop in KLP AksjeGlobal's long position.
The idea behind Dow Jones Industrial and KLP AksjeGlobal Flerfaktor 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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