Correlation Between Dow Jones and Natural Gas
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Natural Gas 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 Natural Gas 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 Natural Gas Mining, you can compare the effects of market volatilities on Dow Jones and Natural Gas 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 Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Natural Gas.
Diversification Opportunities for Dow Jones and Natural Gas
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Natural is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Natural Gas Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Mining 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 Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Mining has no effect on the direction of Dow Jones i.e., Dow Jones and Natural Gas go up and down completely randomly.
Pair Corralation between Dow Jones and Natural Gas
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.37 times more return on investment than Natural Gas. However, Dow Jones Industrial is 2.68 times less risky than Natural Gas. It trades about -0.01 of its potential returns per unit of risk. Natural Gas Mining is currently generating about -0.06 per unit of risk. If you would invest 4,473,657 in Dow Jones Industrial on October 26, 2024 and sell it today you would lose (17,150) from holding Dow Jones Industrial or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 85.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Natural Gas Mining
Performance |
| Timeline |
Dow Jones and Natural Gas Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Natural Gas Mining
Pair trading matchups for Natural Gas
Pair Trading with Dow Jones and Natural Gas
The main advantage of trading using opposite Dow Jones and Natural Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Natural Gas 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 Natural Gas will offset losses from the drop in Natural Gas' long position.| Dow Jones vs. Asure Software | Dow Jones vs. Amkor Technology | Dow Jones vs. Radcom | Dow Jones vs. Senmiao Technology |
| Natural Gas vs. Odin for Investment | Natural Gas vs. B Investments Holding | Natural Gas vs. ODIN Investments | Natural Gas vs. Industrial Engineering Projects |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Transaction History View history of all your transactions and understand their impact on performance | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |