Correlation Between Dow Jones and APA
Can any of the company-specific risk be diversified away by investing in both Dow Jones and APA 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 APA 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 APA Corporation, you can compare the effects of market volatilities on Dow Jones and APA 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 APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and APA.
Diversification Opportunities for Dow Jones and APA
Excellent diversification
The 3 months correlation between Dow and APA is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation 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 APA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APA Corporation has no effect on the direction of Dow Jones i.e., Dow Jones and APA go up and down completely randomly.
Pair Corralation between Dow Jones and APA
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.32 times more return on investment than APA. However, Dow Jones Industrial is 3.13 times less risky than APA. It trades about 0.22 of its potential returns per unit of risk. APA Corporation is currently generating about -0.05 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 190,894 from holding Dow Jones Industrial or generate 4.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. APA Corp.
Performance |
| Timeline |
Dow Jones and APA Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
APA Corporation
Pair trading matchups for APA
Pair Trading with Dow Jones and APA
The main advantage of trading using opposite Dow Jones and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, APA 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 APA will offset losses from the drop in APA's long position.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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