Correlation Between Dow Jones and Grayscale Filecoin

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

Diversification Opportunities for Dow Jones and Grayscale Filecoin

0.59

Correlation Coefficient

Dow Jones  Grayscale Filecoin

Very weak diversification

The 3 months correlation between Dow and Grayscale is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Grayscale Filecoin Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Filecoin Trust 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 Grayscale Filecoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Filecoin Trust has no effect on the direction of Dow Jones i.e., Dow Jones and Grayscale Filecoin go up and down completely randomly.

Pair Corralation between Dow Jones and Grayscale Filecoin

Assuming the 90 days trading horizon Dow Jones is expected to generate 109.02 times less return on investment than Grayscale Filecoin. But when comparing it to its historical volatility, Dow Jones Industrial is 19.01 times less risky than Grayscale Filecoin. It trades about 0.02 of its potential returns per unit of risk. Grayscale Filecoin Trust is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,200  in Grayscale Filecoin Trust on September 19, 2024 and sell it today you would earn a total of  2,064  from holding Grayscale Filecoin Trust or generate 39.69% return on investment over 90 days.

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

Dow Jones Industrial  vs.  Grayscale Filecoin Trust

Pair Trading with Dow Jones and Grayscale Filecoin

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

The idea behind Dow Jones Industrial and Grayscale Filecoin Trust 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 Transaction History module to view history of all your transactions and understand their impact on performance.