Correlation Between Dow Jones and BSA
Can any of the company-specific risk be diversified away by investing in both Dow Jones and BSA 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 BSA 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 BSA, you can compare the effects of market volatilities on Dow Jones and BSA 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 BSA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and BSA.
Diversification Opportunities for Dow Jones and BSA
Weak diversification
The 3 months correlation between Dow and BSA is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and BSA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSA 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 BSA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSA has no effect on the direction of Dow Jones i.e., Dow Jones and BSA go up and down completely randomly.
Pair Corralation between Dow Jones and BSA
Assuming the 90 days trading horizon Dow Jones is expected to generate 6.19 times less return on investment than BSA. But when comparing it to its historical volatility, Dow Jones Industrial is 3.81 times less risky than BSA. It trades about 0.05 of its potential returns per unit of risk. BSA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 86.00 in BSA on September 25, 2024 and sell it today you would earn a total of 12.00 from holding BSA or generate 13.95% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.44% |
Values | Daily Returns |
Dow Jones Industrial vs. BSA
Performance |
Timeline |
Dow Jones and BSA Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
BSA
Pair trading matchups for BSA
Pair Trading with Dow Jones and BSA
The main advantage of trading using opposite Dow Jones and BSA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, BSA 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 BSA will offset losses from the drop in BSA'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 |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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