Correlation Between Dow Jones and YeSUN Tech

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

Diversification Opportunities for Dow Jones and YeSUN Tech

-0.57

Correlation Coefficient

Dow Jones  YeSUN Tech

Excellent diversification

The 3 months correlation between Dow and YeSUN is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and YeSUN Tech CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YeSUN Tech CoLtd 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 YeSUN Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YeSUN Tech CoLtd has no effect on the direction of Dow Jones i.e., Dow Jones and YeSUN Tech go up and down completely randomly.

Pair Corralation between Dow Jones and YeSUN Tech

Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.23 times more return on investment than YeSUN Tech. However, Dow Jones Industrial is 4.39 times less risky than YeSUN Tech. It trades about 0.09 of its potential returns per unit of risk. YeSUN Tech CoLtd is currently generating about -0.05 per unit of risk. If you would invest  2,913,499  in Dow Jones Industrial on June 18, 2024 and sell it today you would earn a total of  1,225,879  from holding Dow Jones Industrial or generate 42.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.38%
Values	Daily Returns

Dow Jones Industrial  vs.  YeSUN Tech CoLtd

Pair Trading with Dow Jones and YeSUN Tech

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

The idea behind Dow Jones Industrial and YeSUN Tech CoLtd 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.