Correlation Between Dow Jones and NewJersey Resources
Can any of the company-specific risk be diversified away by investing in both Dow Jones and NewJersey Resources 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 NewJersey Resources 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 NewJersey Resources, you can compare the effects of market volatilities on Dow Jones and NewJersey Resources 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 NewJersey Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and NewJersey Resources.
Diversification Opportunities for Dow Jones and NewJersey Resources
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and NewJersey is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and NewJersey Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewJersey Resources 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 NewJersey Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewJersey Resources has no effect on the direction of Dow Jones i.e., Dow Jones and NewJersey Resources go up and down completely randomly.
Pair Corralation between Dow Jones and NewJersey Resources
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.43 times more return on investment than NewJersey Resources. However, Dow Jones Industrial is 2.33 times less risky than NewJersey Resources. It trades about 0.2 of its potential returns per unit of risk. NewJersey Resources is currently generating about -0.12 per unit of risk. If you would invest 4,348,783 in Dow Jones Industrial on November 18, 2024 and sell it today you would earn a total of 105,825 from holding Dow Jones Industrial or generate 2.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. NewJersey Resources
Performance |
| Timeline |
Dow Jones and NewJersey Resources Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
NewJersey Resources
Pair trading matchups for NewJersey Resources
Pair Trading with Dow Jones and NewJersey Resources
The main advantage of trading using opposite Dow Jones and NewJersey Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, NewJersey Resources 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 NewJersey Resources will offset losses from the drop in NewJersey Resources' long position.| Dow Jones vs. Palomar Holdings | Dow Jones vs. Mesa Air Group | Dow Jones vs. LATAM Airlines Group | Dow Jones vs. Unum Group |
| NewJersey Resources vs. Atmos Energy | NewJersey Resources vs. UGI Corporation | NewJersey Resources vs. Chesapeake Utilities | NewJersey Resources vs. Spire Inc |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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