Correlation Between TF Bank and Dow Jones
Can any of the company-specific risk be diversified away by investing in both TF Bank and Dow Jones 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 TF Bank and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TF Bank AB and Dow Jones Industrial, you can compare the effects of market volatilities on TF Bank and Dow Jones 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 TF Bank with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of TF Bank and Dow Jones.
Diversification Opportunities for TF Bank and Dow Jones
Very poor diversification
The 3 months correlation between TFBANK and Dow is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding TF Bank AB and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and TF Bank 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 TF Bank AB are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of TF Bank i.e., TF Bank and Dow Jones go up and down completely randomly.
Pair Corralation between TF Bank and Dow Jones
Assuming the 90 days trading horizon TF Bank AB is expected to generate 3.63 times more return on investment than Dow Jones. However, TF Bank is 3.63 times more volatile than Dow Jones Industrial. It trades about 0.24 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.07 per unit of risk. If you would invest 32,400 in TF Bank AB on September 10, 2024 and sell it today you would earn a total of 3,300 from holding TF Bank AB or generate 10.19% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 95.24% |
Values | Daily Returns |
TF Bank AB vs. Dow Jones Industrial
Performance |
Timeline |
TF Bank and Dow Jones Volatility Contrast
Predicted Return Density |
Returns |
TF Bank AB
Pair trading matchups for TF Bank
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with TF Bank and Dow Jones
The main advantage of trading using opposite TF Bank and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TF Bank position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.TF Bank vs. Koninklijke Heijmans NV | TF Bank vs. Resurs Holding AB | TF Bank vs. Trelleborg AB | TF Bank vs. Ferronordic AB |
Dow Jones vs. SEI Investments | Dow Jones vs. Morgan Stanley | Dow Jones vs. CDW Corp | Dow Jones vs. Independence Realty Trust |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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