Correlation Between Dow Jones and Hennessy Gas
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Hennessy 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 Hennessy 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 Hennessy Gas Utility, you can compare the effects of market volatilities on Dow Jones and Hennessy 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 Hennessy Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Hennessy Gas.
Diversification Opportunities for Dow Jones and Hennessy Gas
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Hennessy is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Hennessy Gas Utility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Gas Utility 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 Hennessy Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Gas Utility has no effect on the direction of Dow Jones i.e., Dow Jones and Hennessy Gas go up and down completely randomly.
Pair Corralation between Dow Jones and Hennessy Gas
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.45 times more return on investment than Hennessy Gas. However, Dow Jones Industrial is 2.23 times less risky than Hennessy Gas. It trades about -0.01 of its potential returns per unit of risk. Hennessy Gas Utility is currently generating about -0.23 per unit of risk. If you would invest 4,429,313 in Dow Jones Industrial on September 12, 2024 and sell it today you would lose (4,530) from holding Dow Jones Industrial or give up 0.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Hennessy Gas Utility
Performance |
| Timeline |
Dow Jones and Hennessy Gas Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Hennessy Gas Utility
Pair trading matchups for Hennessy Gas
Pair Trading with Dow Jones and Hennessy Gas
The main advantage of trading using opposite Dow Jones and Hennessy Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Hennessy 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 Hennessy Gas will offset losses from the drop in Hennessy Gas' long position.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
| Hennessy Gas vs. Utilities Fund Investor | Hennessy Gas vs. Amg Yacktman Focused | Hennessy Gas vs. Chemicals Portfolio Chemicals | Hennessy Gas vs. Invesco Energy Fund |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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