Correlation Between Dow Jones and Centrica PLC
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Centrica PLC 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 Centrica PLC 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 Centrica PLC ADR, you can compare the effects of market volatilities on Dow Jones and Centrica PLC 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 Centrica PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Centrica PLC.
Diversification Opportunities for Dow Jones and Centrica PLC
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dow and Centrica is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Centrica PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrica PLC ADR 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 Centrica PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrica PLC ADR has no effect on the direction of Dow Jones i.e., Dow Jones and Centrica PLC go up and down completely randomly.
Pair Corralation between Dow Jones and Centrica PLC
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.33 times more return on investment than Centrica PLC. However, Dow Jones Industrial is 3.06 times less risky than Centrica PLC. It trades about 0.14 of its potential returns per unit of risk. Centrica PLC ADR is currently generating about -0.01 per unit of risk. If you would invest 3,373,930 in Dow Jones Industrial on September 4, 2024 and sell it today you would earn a total of 1,104,270 from holding Dow Jones Industrial or generate 32.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Centrica PLC ADR
Performance |
| Timeline |
Dow Jones and Centrica PLC Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Centrica PLC ADR
Pair trading matchups for Centrica PLC
Pair Trading with Dow Jones and Centrica PLC
The main advantage of trading using opposite Dow Jones and Centrica PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Centrica PLC 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 Centrica PLC will offset losses from the drop in Centrica PLC's long position.| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
| Centrica PLC vs. NRG Energy | Centrica PLC vs. TransAlta Corp | Centrica PLC vs. Kenon Holdings | Centrica PLC vs. Pampa Energia SA |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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