Correlation Between CES Energy and Dow Jones
Can any of the company-specific risk be diversified away by investing in both CES Energy 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 CES Energy and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CES Energy Solutions and Dow Jones Industrial, you can compare the effects of market volatilities on CES Energy 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 CES Energy with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of CES Energy and Dow Jones.
Diversification Opportunities for CES Energy and Dow Jones
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CES and Dow is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CES Energy Solutions 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 CES Energy 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 CES Energy Solutions 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 CES Energy i.e., CES Energy and Dow Jones go up and down completely randomly.
Pair Corralation between CES Energy and Dow Jones
Assuming the 90 days trading horizon CES Energy Solutions is expected to generate 3.12 times more return on investment than Dow Jones. However, CES Energy is 3.12 times more volatile than Dow Jones Industrial. It trades about 0.36 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.21 per unit of risk. If you would invest 774.00 in CES Energy Solutions on August 25, 2024 and sell it today you would earn a total of 203.00 from holding CES Energy Solutions or generate 26.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CES Energy Solutions vs. Dow Jones Industrial
Performance |
| Timeline |
CES Energy and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
CES Energy Solutions
Pair trading matchups for CES Energy
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with CES Energy and Dow Jones
The main advantage of trading using opposite CES Energy and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CES Energy 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.| CES Energy vs. Secure Energy Services | CES Energy vs. Ensign Energy Services | CES Energy vs. Kelt Exploration | CES Energy vs. Trican Well Service |
| 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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