Correlation Between Dow Jones and OFS Credit
Can any of the company-specific risk be diversified away by investing in both Dow Jones and OFS Credit 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 OFS Credit 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 OFS Credit, you can compare the effects of market volatilities on Dow Jones and OFS Credit 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 OFS Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and OFS Credit.
Diversification Opportunities for Dow Jones and OFS Credit
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and OFS is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and OFS Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFS Credit 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 OFS Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFS Credit has no effect on the direction of Dow Jones i.e., Dow Jones and OFS Credit go up and down completely randomly.
Pair Corralation between Dow Jones and OFS Credit
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.23 times less return on investment than OFS Credit. But when comparing it to its historical volatility, Dow Jones Industrial is 1.47 times less risky than OFS Credit. It trades about 0.1 of its potential returns per unit of risk. OFS Credit is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 575.00 in OFS Credit on November 9, 2024 and sell it today you would earn a total of 138.00 from holding OFS Credit or generate 24.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Dow Jones Industrial vs. OFS Credit
Performance |
| Timeline |
Dow Jones and OFS Credit Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
OFS Credit
Pair trading matchups for OFS Credit
Pair Trading with Dow Jones and OFS Credit
The main advantage of trading using opposite Dow Jones and OFS Credit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, OFS Credit 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 OFS Credit will offset losses from the drop in OFS Credit's long position.| Dow Jones vs. Douglas Emmett | Dow Jones vs. Todos Medical | Dow Jones vs. Eastern Co | Dow Jones vs. Merit Medical Systems |
| OFS Credit vs. WhiteHorse Finance | OFS Credit vs. Monroe Capital Corp | OFS Credit vs. Portman Ridge Finance | OFS Credit vs. Fidus Investment 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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