Correlation Between Dow Jones and Boston Scientific
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Boston Scientific 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 Boston Scientific 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 Boston Scientific, you can compare the effects of market volatilities on Dow Jones and Boston Scientific 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 Boston Scientific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Boston Scientific.
Diversification Opportunities for Dow Jones and Boston Scientific
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Boston is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Boston Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Scientific 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 Boston Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Scientific has no effect on the direction of Dow Jones i.e., Dow Jones and Boston Scientific go up and down completely randomly.
Pair Corralation between Dow Jones and Boston Scientific
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.9 times less return on investment than Boston Scientific. But when comparing it to its historical volatility, Dow Jones Industrial is 1.53 times less risky than Boston Scientific. It trades about 0.09 of its potential returns per unit of risk. Boston Scientific is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 42,398 in Boston Scientific on September 25, 2024 and sell it today you would earn a total of 13,060 from holding Boston Scientific or generate 30.8% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.21% |
Values | Daily Returns |
Dow Jones Industrial vs. Boston Scientific
Performance |
Timeline |
Dow Jones and Boston Scientific Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Boston Scientific
Pair trading matchups for Boston Scientific
Pair Trading with Dow Jones and Boston Scientific
The main advantage of trading using opposite Dow Jones and Boston Scientific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Boston Scientific 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 Boston Scientific will offset losses from the drop in Boston Scientific's long position.Dow Jones vs. Aerofoam Metals | Dow Jones vs. Lion One Metals | Dow Jones vs. Blue Moon Metals | Dow Jones vs. Xunlei Ltd Adr |
Boston Scientific vs. Cognizant Technology Solutions | Boston Scientific vs. Verizon Communications | Boston Scientific vs. Align Technology | Boston Scientific vs. Unity Software |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |