Correlation Between Dow Jones and Huntsman Exploration
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Huntsman Exploration 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 Huntsman Exploration 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 Huntsman Exploration, you can compare the effects of market volatilities on Dow Jones and Huntsman Exploration 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 Huntsman Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Huntsman Exploration.
Diversification Opportunities for Dow Jones and Huntsman Exploration
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Huntsman is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Huntsman Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntsman Exploration 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 Huntsman Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntsman Exploration has no effect on the direction of Dow Jones i.e., Dow Jones and Huntsman Exploration go up and down completely randomly.
Pair Corralation between Dow Jones and Huntsman Exploration
Assuming the 90 days trading horizon Dow Jones is expected to generate 324.11 times less return on investment than Huntsman Exploration. But when comparing it to its historical volatility, Dow Jones Industrial is 182.57 times less risky than Huntsman Exploration. It trades about 0.08 of its potential returns per unit of risk. Huntsman Exploration is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1.10 in Huntsman Exploration on August 24, 2024 and sell it today you would earn a total of 2.60 from holding Huntsman Exploration or generate 236.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. Huntsman Exploration
Performance |
| Timeline |
Dow Jones and Huntsman Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Huntsman Exploration
Pair trading matchups for Huntsman Exploration
Pair Trading with Dow Jones and Huntsman Exploration
The main advantage of trading using opposite Dow Jones and Huntsman Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Huntsman Exploration 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 Huntsman Exploration will offset losses from the drop in Huntsman Exploration's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Huntsman Exploration vs. Aurelia Metals Limited | Huntsman Exploration vs. Adriatic Metals PLC | Huntsman Exploration vs. American Helium | Huntsman Exploration vs. Progressive Planet Solutions |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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