Correlation Between Dow Jones and OCI
Can any of the company-specific risk be diversified away by investing in both Dow Jones and OCI 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 OCI 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 OCI Co, you can compare the effects of market volatilities on Dow Jones and OCI 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 OCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and OCI.
Diversification Opportunities for Dow Jones and OCI
Modest diversification
The 3 months correlation between Dow and OCI is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and OCI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OCI Co 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 OCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OCI Co has no effect on the direction of Dow Jones i.e., Dow Jones and OCI go up and down completely randomly.
Pair Corralation between Dow Jones and OCI
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.16 times more return on investment than OCI. However, Dow Jones Industrial is 6.33 times less risky than OCI. It trades about -0.21 of its potential returns per unit of risk. OCI Co is currently generating about -0.05 per unit of risk. If you would invest 4,471,358 in Dow Jones Industrial on November 28, 2024 and sell it today you would lose (128,046) from holding Dow Jones Industrial or give up 2.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 81.82% |
| Values | Daily Returns |
Dow Jones Industrial vs. OCI Co
Performance |
| Timeline |
Dow Jones and OCI Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
OCI Co
Pair trading matchups for OCI
Pair Trading with Dow Jones and OCI
The main advantage of trading using opposite Dow Jones and OCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, OCI 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 OCI will offset losses from the drop in OCI's long position.| Dow Jones vs. Gladstone Investment | Dow Jones vs. BW Offshore Limited | Dow Jones vs. Fidus Investment Corp | Dow Jones vs. Aperture Health |
| OCI vs. DONGKUK TED METAL | OCI vs. Heungkuk Metaltech CoLtd | OCI vs. System and Application | OCI vs. Kukil Metal 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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