Correlation Between Bbh Limited and Dow Jones

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Can any of the company-specific risk be diversified away by investing in both Bbh Limited 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 Bbh Limited and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bbh Limited Duration and Dow Jones Industrial, you can compare the effects of market volatilities on Bbh Limited 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 Bbh Limited with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bbh Limited and Dow Jones.

Diversification Opportunities for Bbh Limited and Dow Jones

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Bbh and Dow is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bbh Limited Duration 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 Bbh Limited 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 Bbh Limited Duration 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 Bbh Limited i.e., Bbh Limited and Dow Jones go up and down completely randomly.
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Pair Corralation between Bbh Limited and Dow Jones

Assuming the 90 days horizon Bbh Limited Duration is not expected to generate positive returns. However, Bbh Limited Duration is 23.05 times less risky than Dow Jones. It waists most of its returns potential to compensate for thr risk taken. Dow Jones is generating about 0.11 per unit of risk. If you would invest  4,306,522  in Dow Jones Industrial on August 13, 2024 and sell it today you would earn a total of  92,377  from holding Dow Jones Industrial or generate 2.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Bbh Limited Duration  vs.  Dow Jones Industrial

 Performance 
       Timeline  

Bbh Limited and Dow Jones Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bbh Limited and Dow Jones

The main advantage of trading using opposite Bbh Limited and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bbh Limited 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 Bbh Limited Duration 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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