Correlation Between Cheniere Energy and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Cheniere 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 Cheniere 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 Cheniere Energy and Dow Jones Industrial, you can compare the effects of market volatilities on Cheniere 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 Cheniere Energy with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheniere Energy and Dow Jones.
Diversification Opportunities for Cheniere Energy and Dow Jones
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cheniere and Dow is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy 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 Cheniere 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 Cheniere Energy 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 Cheniere Energy i.e., Cheniere Energy and Dow Jones go up and down completely randomly.
Pair Corralation between Cheniere Energy and Dow Jones
Assuming the 90 days trading horizon Cheniere Energy is expected to generate 2.35 times more return on investment than Dow Jones. However, Cheniere Energy is 2.35 times more volatile than Dow Jones Industrial. It trades about 0.15 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 14,299 in Cheniere Energy on September 3, 2024 and sell it today you would earn a total of 6,601 from holding Cheniere Energy or generate 46.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.69% |
| Values | Daily Returns |
Cheniere Energy vs. Dow Jones Industrial
Performance |
| Timeline |
Cheniere Energy and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Cheniere Energy
Pair trading matchups for Cheniere Energy
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Cheniere Energy and Dow Jones
The main advantage of trading using opposite Cheniere Energy and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheniere 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.| Cheniere Energy vs. ONEOK Inc | Cheniere Energy vs. Pembina Pipeline Corp | Cheniere Energy vs. Superior Plus Corp | Cheniere Energy vs. NMI Holdings |
| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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