Correlation Between Dow Jones and Highway 50
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Highway 50 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 Highway 50 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 Highway 50 Gold, you can compare the effects of market volatilities on Dow Jones and Highway 50 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 Highway 50. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Highway 50.
Diversification Opportunities for Dow Jones and Highway 50
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Highway is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Highway 50 Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway 50 Gold 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 Highway 50. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway 50 Gold has no effect on the direction of Dow Jones i.e., Dow Jones and Highway 50 go up and down completely randomly.
Pair Corralation between Dow Jones and Highway 50
Assuming the 90 days trading horizon Dow Jones is expected to generate 21.62 times less return on investment than Highway 50. But when comparing it to its historical volatility, Dow Jones Industrial is 16.64 times less risky than Highway 50. It trades about 0.1 of its potential returns per unit of risk. Highway 50 Gold is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 26.00 in Highway 50 Gold on August 29, 2025 and sell it today you would earn a total of 24.00 from holding Highway 50 Gold or generate 92.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Dow Jones Industrial vs. Highway 50 Gold
Performance |
| Timeline |
Dow Jones and Highway 50 Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Highway 50 Gold
Pair trading matchups for Highway 50
Pair Trading with Dow Jones and Highway 50
The main advantage of trading using opposite Dow Jones and Highway 50 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Highway 50 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 Highway 50 will offset losses from the drop in Highway 50's long position.| Dow Jones vs. Motorcar Parts of | Dow Jones vs. SoftwareONE Holding AG | Dow Jones vs. PSI Software AG | Dow Jones vs. CARsgen Therapeutics Holdings |
| Highway 50 vs. The Hanover Insurance | Highway 50 vs. Centaur Media Plc | Highway 50 vs. Life Insurance | Highway 50 vs. White Mountains Insurance |
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 the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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