Correlation Between Dow Jones and Africa Oil
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Africa Oil 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 Africa Oil 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 Africa Oil Corp, you can compare the effects of market volatilities on Dow Jones and Africa Oil 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 Africa Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Africa Oil.
Diversification Opportunities for Dow Jones and Africa Oil
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dow and Africa is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Africa Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Oil Corp 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 Africa Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Oil Corp has no effect on the direction of Dow Jones i.e., Dow Jones and Africa Oil go up and down completely randomly.
Pair Corralation between Dow Jones and Africa Oil
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.35 times more return on investment than Africa Oil. However, Dow Jones Industrial is 2.84 times less risky than Africa Oil. It trades about 0.08 of its potential returns per unit of risk. Africa Oil Corp is currently generating about -0.03 per unit of risk. If you would invest 3,867,169 in Dow Jones Industrial on November 5, 2024 and sell it today you would earn a total of 575,022 from holding Dow Jones Industrial or generate 14.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Dow Jones Industrial vs. Africa Oil Corp
Performance |
| Timeline |
Dow Jones and Africa Oil Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Africa Oil Corp
Pair trading matchups for Africa Oil
Pair Trading with Dow Jones and Africa Oil
The main advantage of trading using opposite Dow Jones and Africa Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Africa Oil 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 Africa Oil will offset losses from the drop in Africa Oil's long position.| Dow Jones vs. Fernhill Beverage | Dow Jones vs. Fomento Economico Mexicano | Dow Jones vs. Loud Beverage Group | Dow Jones vs. Diageo PLC ADR |
| Africa Oil vs. International Petroleum | Africa Oil vs. Africa Energy Corp | Africa Oil vs. Africa Oil Corp | Africa Oil vs. Lundin Mining |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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