Correlation Between Dow Jones and One Gas
Can any of the company-specific risk be diversified away by investing in both Dow Jones and One 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 One 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 One Gas, you can compare the effects of market volatilities on Dow Jones and One 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 One Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and One Gas.
Diversification Opportunities for Dow Jones and One Gas
Poor diversification
The 3 months correlation between Dow and One is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and One Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Gas 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 One Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Gas has no effect on the direction of Dow Jones i.e., Dow Jones and One Gas go up and down completely randomly.
Pair Corralation between Dow Jones and One Gas
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.7 times less return on investment than One Gas. But when comparing it to its historical volatility, Dow Jones Industrial is 2.01 times less risky than One Gas. It trades about 0.12 of its potential returns per unit of risk. One Gas is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,539 in One Gas on August 26, 2024 and sell it today you would earn a total of 2,248 from holding One Gas or generate 40.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. One Gas
Performance |
| Timeline |
Dow Jones and One Gas Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
One Gas
Pair trading matchups for One Gas
Pair Trading with Dow Jones and One Gas
The main advantage of trading using opposite Dow Jones and One Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, One 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 One Gas will offset losses from the drop in One Gas' long position.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| One Gas vs. Northwest Natural Gas | One Gas vs. Chesapeake Utilities | One Gas vs. NewJersey Resources | One Gas vs. RGC Resources |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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