Correlation Between Dupont De and Dow Jones

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

By analyzing existing cross correlation between Dupont De Nemours and Dow Jones Industrial, you can compare the effects of market volatilities on Dupont De 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 Dupont De with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Dow Jones.

Diversification Opportunities for Dupont De and Dow Jones

0.37

Correlation Coefficient

Dupont De  Dow Jones

Weak diversification

The 3 months correlation between Dupont and Dow is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and Dow Jones go up and down completely randomly.

Pair Corralation between Dupont De and Dow Jones

Allowing for the 90-day total investment horizon Dupont De is expected to generate 2.99 times less return on investment than Dow Jones. In addition to that, Dupont De is 3.12 times more volatile than Dow Jones Industrial. It trades about 0.02 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.23 per unit of volatility. If you would invest  7,776  in Dow Jones Industrial on January 25, 2024 and sell it today you would earn a total of  1,471  from holding Dow Jones Industrial or generate 18.92% return on investment over 90 days.

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

Dupont De Nemours  vs.  Dow Jones Industrial

Dupont De Nemours

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Dupont De exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dow Jones Industrial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dow Jones Industrial are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Dow Jones is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dupont De and Dow Jones

The main advantage of trading using opposite Dupont De and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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.

The idea behind Dupont De Nemours and Dow Jones Industrial 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.