Correlation Between Dow Jones and PetroChina
Can any of the company-specific risk be diversified away by investing in both Dow Jones and PetroChina 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 PetroChina 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 PetroChina Co Ltd, you can compare the effects of market volatilities on Dow Jones and PetroChina 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 PetroChina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and PetroChina.
Diversification Opportunities for Dow Jones and PetroChina
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and PetroChina is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina 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 PetroChina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroChina has no effect on the direction of Dow Jones i.e., Dow Jones and PetroChina go up and down completely randomly.
Pair Corralation between Dow Jones and PetroChina
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.42 times more return on investment than PetroChina. However, Dow Jones Industrial is 2.38 times less risky than PetroChina. It trades about 0.29 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about -0.15 per unit of risk. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 258,052 from holding Dow Jones Industrial or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. PetroChina Co Ltd
Performance |
| Timeline |
Dow Jones and PetroChina Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
PetroChina Co Ltd
Pair trading matchups for PetroChina
Pair Trading with Dow Jones and PetroChina
The main advantage of trading using opposite Dow Jones and PetroChina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, PetroChina 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 PetroChina will offset losses from the drop in PetroChina's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| PetroChina vs. Equinor ASA | PetroChina vs. Origin Energy Ltd | PetroChina vs. Shell PLC | PetroChina vs. Eni SpA ADR |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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