Correlation Between DIA and Theta Fuel
Can any of the company-specific risk be diversified away by investing in both DIA and Theta Fuel 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 DIA and Theta Fuel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DIA and Theta Fuel, you can compare the effects of market volatilities on DIA and Theta Fuel 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 DIA with a short position of Theta Fuel. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIA and Theta Fuel.
Diversification Opportunities for DIA and Theta Fuel
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between DIA and Theta is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding DIA and Theta Fuel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Theta Fuel and DIA 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 DIA are associated (or correlated) with Theta Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Theta Fuel has no effect on the direction of DIA i.e., DIA and Theta Fuel go up and down completely randomly.
Pair Corralation between DIA and Theta Fuel
Assuming the 90 days trading horizon DIA is expected to generate 0.96 times more return on investment than Theta Fuel. However, DIA is 1.05 times less risky than Theta Fuel. It trades about 0.07 of its potential returns per unit of risk. Theta Fuel is currently generating about 0.05 per unit of risk. If you would invest 33.00 in DIA on August 28, 2024 and sell it today you would earn a total of 50.00 from holding DIA or generate 151.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DIA vs. Theta Fuel
Performance |
| Timeline |
| DIA |
| Theta Fuel |
DIA and Theta Fuel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DIA and Theta Fuel
The main advantage of trading using opposite DIA and Theta Fuel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DIA position performs unexpectedly, Theta Fuel 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 Theta Fuel will offset losses from the drop in Theta Fuel's long position.The idea behind DIA and Theta Fuel 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.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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