Correlation Between Dow Jones and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Equinor ASA 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 Equinor ASA 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 Equinor ASA, you can compare the effects of market volatilities on Dow Jones and Equinor ASA 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 Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Equinor ASA.
Diversification Opportunities for Dow Jones and Equinor ASA
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dow and Equinor is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA 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 Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA has no effect on the direction of Dow Jones i.e., Dow Jones and Equinor ASA go up and down completely randomly.
Pair Corralation between Dow Jones and Equinor ASA
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.3 times more return on investment than Equinor ASA. However, Dow Jones Industrial is 3.3 times less risky than Equinor ASA. It trades about 0.01 of its potential returns per unit of risk. Equinor ASA is currently generating about -0.1 per unit of risk. If you would invest 4,338,960 in Dow Jones Industrial on September 19, 2024 and sell it today you would earn a total of 6,030 from holding Dow Jones Industrial or generate 0.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Dow Jones Industrial vs. Equinor ASA
Performance |
| Timeline |
Dow Jones and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Equinor ASA
Pair trading matchups for Equinor ASA
Pair Trading with Dow Jones and Equinor ASA
The main advantage of trading using opposite Dow Jones and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Equinor ASA 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 Equinor ASA will offset losses from the drop in Equinor ASA's long position.| Dow Jones vs. Mangazeya Mining | Dow Jones vs. Summit Materials | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. AMCON Distributing |
| Equinor ASA vs. NXP Semiconductors NV | Equinor ASA vs. AGRICULTBK HADR25 YC | Equinor ASA vs. Granite Construction | Equinor ASA vs. Australian Agricultural |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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