Correlation Between CAC 40 and DOW

By analyzing existing cross correlation between CAC 40 and DOW, you can compare the effects of market volatilities on CAC 40 and DOW 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 CAC 40 with a short position of DOW. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAC 40 and DOW.

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Can any of the company-specific risk be diversified away by investing in both CAC 40 and DOW 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 CAC 40 and DOW into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for CAC 40 and DOW

0.88
  Correlation Coefficient
CAC 40
DOW

Very poor diversification

The 3 months correlation between CAC 40 and DOW is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CAC 40 and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW and CAC 40 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 CAC 40 are associated (or correlated) with DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of CAC 40 i.e. CAC 40 and DOW go up and down completely randomly.
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Pair Corralation between CAC 40 and DOW

Assuming the 30 trading days horizon, CAC 40 is expected to generate 1.09 times less return on investment than DOW. In addition to that, CAC 40 is 1.07 times more volatile than DOW. It trades about 0.09 of its total potential returns per unit of risk. DOW is currently generating about 0.1 per unit of volatility. If you would invest  2,339,077  in DOW on June 11, 2020 and sell it today you would earn a total of  268,453  from holding DOW or generate 11.48% return on investment over 30 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

CAC 40  vs.  DOW

 Performance (%) 
      Timeline 
 Predicted Return Density 
      Returns 
Check out your portfolio center. Please also try Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.


 
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