Correlation Between Dow Jones and First Energy
Can any of the company-specific risk be diversified away by investing in both Dow Jones and First Energy 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 First Energy 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 First Energy Metals, you can compare the effects of market volatilities on Dow Jones and First Energy 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 First Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and First Energy.
Diversification Opportunities for Dow Jones and First Energy
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and First is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and First Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Energy Metals 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 First Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Energy Metals has no effect on the direction of Dow Jones i.e., Dow Jones and First Energy go up and down completely randomly.
Pair Corralation between Dow Jones and First Energy
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.07 times more return on investment than First Energy. However, Dow Jones Industrial is 13.36 times less risky than First Energy. It trades about 0.08 of its potential returns per unit of risk. First Energy Metals is currently generating about 0.0 per unit of risk. If you would invest 3,408,927 in Dow Jones Industrial on November 5, 2024 and sell it today you would earn a total of 1,045,539 from holding Dow Jones Industrial or generate 30.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Dow Jones Industrial vs. First Energy Metals
Performance |
| Timeline |
Dow Jones and First Energy Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
First Energy Metals
Pair trading matchups for First Energy
Pair Trading with Dow Jones and First Energy
The main advantage of trading using opposite Dow Jones and First Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, First Energy 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 First Energy will offset losses from the drop in First Energy's long position.| Dow Jones vs. Fernhill Beverage | Dow Jones vs. Fomento Economico Mexicano | Dow Jones vs. Loud Beverage Group | Dow Jones vs. Diageo PLC ADR |
| First Energy vs. MCF Energy | First Energy vs. Hypercharge Networks Corp | First Energy vs. Traction Uranium Corp | First Energy vs. F3 Uranium Corp |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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