Correlation Between Dow Jones and Tobii AB

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

Diversification Opportunities for Dow Jones and Tobii AB

-0.73

Correlation Coefficient

Dow Jones  Tobii AB

Pay attention - limited upside

The 3 months correlation between Dow and Tobii is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Tobii AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tobii AB 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 Tobii AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tobii AB has no effect on the direction of Dow Jones i.e., Dow Jones and Tobii AB go up and down completely randomly.

Pair Corralation between Dow Jones and Tobii AB

Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.2 times more return on investment than Tobii AB. However, Dow Jones Industrial is 4.92 times less risky than Tobii AB. It trades about 0.16 of its potential returns per unit of risk. Tobii AB is currently generating about -0.09 per unit of risk. 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  315,106  from holding Dow Jones Industrial or generate 7.67% return on investment over 90 days.

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

Dow Jones Industrial  vs.  Tobii AB

Pair Trading with Dow Jones and Tobii AB

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

The idea behind Dow Jones Industrial and Tobii AB 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..