Correlation Between Dow Jones and PGE Corp
Can any of the company-specific risk be diversified away by investing in both Dow Jones and PGE Corp 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 PGE Corp 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 PGE Corp, you can compare the effects of market volatilities on Dow Jones and PGE Corp 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 PGE Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and PGE Corp.
Diversification Opportunities for Dow Jones and PGE Corp
Poor diversification
The 3 months correlation between Dow and PGE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and PGE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGE Corp 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 PGE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corp has no effect on the direction of Dow Jones i.e., Dow Jones and PGE Corp go up and down completely randomly.
Pair Corralation between Dow Jones and PGE Corp
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.0 times more return on investment than PGE Corp. However, Dow Jones Industrial is 1.0 times less risky than PGE Corp. It trades about 0.15 of its potential returns per unit of risk. PGE Corp is currently generating about 0.15 per unit of risk. If you would invest 4,251,495 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 135,540 from holding Dow Jones Industrial or generate 3.19% 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. PGE Corp
Performance |
| Timeline |
Dow Jones and PGE Corp Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
PGE Corp
Pair trading matchups for PGE Corp
Pair Trading with Dow Jones and PGE Corp
The main advantage of trading using opposite Dow Jones and PGE Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, PGE Corp 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 PGE Corp will offset losses from the drop in PGE Corp'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 |
| PGE Corp vs. Consolidated Edison | PGE Corp vs. Southern Company | PGE Corp vs. Entergy | PGE Corp vs. Pinnacle West Capital |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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