Correlation Between Dow Jones and Biophytis

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

Diversification Opportunities for Dow Jones and Biophytis

-0.74

Correlation Coefficient

Dow Jones  Biophytis

Pay attention - limited upside

The 3 months correlation between Dow and Biophytis is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Biophytis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biophytis 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 Biophytis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biophytis has no effect on the direction of Dow Jones i.e., Dow Jones and Biophytis go up and down completely randomly.

Pair Corralation between Dow Jones and Biophytis

If you would invest  4,306,522  in Dow Jones Industrial on September 13, 2024 and sell it today you would earn a total of  84,890  from holding Dow Jones Industrial or generate 1.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	2.33%
Values	Daily Returns

Dow Jones Industrial  vs.  Biophytis

Pair Trading with Dow Jones and Biophytis

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

The idea behind Dow Jones Industrial and Biophytis 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.