Correlation Between Dow Jones and National Energy
Can any of the company-specific risk be diversified away by investing in both Dow Jones and National 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 National 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 National Energy Services, you can compare the effects of market volatilities on Dow Jones and National 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 National Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and National Energy.
Diversification Opportunities for Dow Jones and National Energy
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and National is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and National Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Energy Services 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 National Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Energy Services has no effect on the direction of Dow Jones i.e., Dow Jones and National Energy go up and down completely randomly.
Pair Corralation between Dow Jones and National Energy
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.79 times less return on investment than National Energy. But when comparing it to its historical volatility, Dow Jones Industrial is 4.79 times less risky than National Energy. It trades about 0.13 of its potential returns per unit of risk. National Energy Services is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 526.00 in National Energy Services on August 24, 2024 and sell it today you would earn a total of 323.00 from holding National Energy Services or generate 61.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. National Energy Services
Performance |
| Timeline |
Dow Jones and National Energy Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
National Energy Services
Pair trading matchups for National Energy
Pair Trading with Dow Jones and National Energy
The main advantage of trading using opposite Dow Jones and National Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, National 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 National Energy will offset losses from the drop in National Energy's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| National Energy vs. Dawson Geophysical | National Energy vs. Mccoy Global | National Energy vs. Ranger Energy Services | National Energy vs. MRC Global |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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