Correlation Between DOW JONES and Plus500

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both DOW JONES and Plus500 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 Plus500 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 Plus500, you can compare the effects of market volatilities on DOW JONES and Plus500 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 Plus500. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOW JONES and Plus500.

Diversification Opportunities for DOW JONES and Plus500

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between DOW JONES and Plus500 is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding DOW JONES INDUSTRIAL and Plus500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plus500 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 Plus500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plus500 has no effect on the direction of DOW JONES i.e., DOW JONES and Plus500 go up and down completely randomly.
    Optimize

Pair Corralation between DOW JONES and Plus500

Given the investment horizon of 90 days DOW JONES INDUSTRIAL is expected to generate 1.05 times more return on investment than Plus500. However, DOW JONES is 1.05 times more volatile than Plus500. It trades about 0.12 of its potential returns per unit of risk. Plus500 is currently generating about -0.13 per unit of risk. If you would invest  3,131,844  in DOW JONES INDUSTRIAL on September 2, 2022 and sell it today you would earn a total of  327,133  from holding DOW JONES INDUSTRIAL or generate 10.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.41%
ValuesDaily Returns

DOW JONES INDUSTRIAL  vs.  Plus500

 Performance (%) 
       Timeline  

DOW JONES and Plus500 Volatility Contrast

   Predicted Return Density   
       Returns  

DOW JONES INDUSTRIAL

Pair trading matchups for DOW JONES

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW JONES as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW JONES's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW JONES's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW JONES INDUSTRIAL.

Plus500

Pair trading matchups for Plus500

Pair Trading with DOW JONES and Plus500

The main advantage of trading using opposite DOW JONES and Plus500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOW JONES position performs unexpectedly, Plus500 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 Plus500 will offset losses from the drop in Plus500's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW JONES as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW JONES's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW JONES's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW JONES INDUSTRIAL.
The idea behind DOW JONES INDUSTRIAL and Plus500 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.
Plus500 vs. Chevron Corp
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

Other Complementary Tools

Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Go
Commodity Channel Index
Use Commodity Channel Index to analyze current equity momentum
Go
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Go
Fund Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Go
Earnings Calls
Check upcoming earnings announcements updated hourly across public exchanges
Go
My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
Go
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Go
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Go