Correlation Between Dow Jones and Lekoil
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Lekoil 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 Lekoil 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 Lekoil Limited, you can compare the effects of market volatilities on Dow Jones and Lekoil 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 Lekoil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Lekoil.
Diversification Opportunities for Dow Jones and Lekoil
Excellent diversification
The 3 months correlation between Dow and Lekoil is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Lekoil Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lekoil Limited 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 Lekoil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lekoil Limited has no effect on the direction of Dow Jones i.e., Dow Jones and Lekoil go up and down completely randomly.
Pair Corralation between Dow Jones and Lekoil
Assuming the 90 days trading horizon Dow Jones is expected to generate 8.79 times less return on investment than Lekoil. But when comparing it to its historical volatility, Dow Jones Industrial is 12.14 times less risky than Lekoil. It trades about 0.08 of its potential returns per unit of risk. Lekoil Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.40 in Lekoil Limited on August 30, 2024 and sell it today you would earn a total of 0.65 from holding Lekoil Limited or generate 162.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Dow Jones Industrial vs. Lekoil Limited
Performance |
| Timeline |
Dow Jones and Lekoil Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Lekoil Limited
Pair trading matchups for Lekoil
Pair Trading with Dow Jones and Lekoil
The main advantage of trading using opposite Dow Jones and Lekoil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Lekoil 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 Lekoil will offset losses from the drop in Lekoil's long position.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| Lekoil vs. Fukuyama Transporting Co | Lekoil vs. USWE SPORTS AB | Lekoil vs. National Bank Holdings | Lekoil vs. Gaztransport Technigaz 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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