Correlation Between Dow Jones and PXP Energy
Can any of the company-specific risk be diversified away by investing in both Dow Jones and PXP Energy 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 PXP Energy 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 PXP Energy Corp, you can compare the effects of market volatilities on Dow Jones and PXP Energy 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 PXP Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and PXP Energy.
Diversification Opportunities for Dow Jones and PXP Energy
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and PXP is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and PXP Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PXP Energy 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 PXP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PXP Energy Corp has no effect on the direction of Dow Jones i.e., Dow Jones and PXP Energy go up and down completely randomly.
Pair Corralation between Dow Jones and PXP Energy
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.52 times more return on investment than PXP Energy. However, Dow Jones Industrial is 1.92 times less risky than PXP Energy. It trades about 0.37 of its potential returns per unit of risk. PXP Energy Corp is currently generating about -0.27 per unit of risk. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. PXP Energy Corp
Performance |
| Timeline |
Dow Jones and PXP Energy Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
PXP Energy Corp
Pair trading matchups for PXP Energy
Pair Trading with Dow Jones and PXP Energy
The main advantage of trading using opposite Dow Jones and PXP Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, PXP Energy 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 PXP Energy will offset losses from the drop in PXP Energy's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| PXP Energy vs. SM Investments Corp | PXP Energy vs. San Miguel Pure | PXP Energy vs. Ayala Corp | PXP Energy vs. Ayala Land |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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