Correlation Between Blue Water and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Blue Water 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 Blue Water and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Water Petroleum and Dow Jones Industrial, you can compare the effects of market volatilities on Blue Water 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 Blue Water with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Water and Dow Jones.
Diversification Opportunities for Blue Water and Dow Jones
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Blue and Dow is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Blue Water Petroleum 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 Blue Water 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 Blue Water Petroleum 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 Blue Water i.e., Blue Water and Dow Jones go up and down completely randomly.
Pair Corralation between Blue Water and Dow Jones
Given the investment horizon of 90 days Blue Water Petroleum is expected to generate 13.52 times more return on investment than Dow Jones. However, Blue Water is 13.52 times more volatile than Dow Jones Industrial. It trades about 0.08 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.14 per unit of risk. If you would invest 20.00 in Blue Water Petroleum on August 25, 2024 and sell it today you would earn a total of 3.00 from holding Blue Water Petroleum or generate 15.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Water Petroleum vs. Dow Jones Industrial
Performance |
| Timeline |
Blue Water and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Blue Water Petroleum
Pair trading matchups for Blue Water
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Blue Water and Dow Jones
The main advantage of trading using opposite Blue Water and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Water 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.| Blue Water vs. Petroleo Brasileiro Petrobras | Blue Water vs. Equinor ASA ADR | Blue Water vs. Eni SpA ADR | Blue Water vs. YPF Sociedad Anonima |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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